§ Mr. Deputy Speaker (Sir Paul Dean)
May I repeat Mr. Speaker's appeal for brevity? No fewer than 50 hon. Members hope to speak in this debate. At present the Chair does not have the power to impose a 10-minute limit on speeches because it has not yet been renewed. Hon. Members should restrain themselves and be as brief as possible. Mr. Speaker has selected the amendment in the name of the Prime Minister.
§ Mr. Roy Hattersley (Birmingham, Sparkbrook)
I beg to move,That this House condemns Government economic policies, which have divided the nation, induced a collapse in the manufacturing base, created mass unemployment, led to a serious loss in world trade and an impending balance of payments crisis, and permitted a destructive merger mania to imperil British manufacturing industry, as typified by the lamentable decision of the Secretary of State for Trade and Industry not to refer the BTR bid for Pilkingtons to the Monopolies and Mergers Commission; and demands that the Government now use all available resources on investment in the people of the United Kingdom, in jobs, in public services, in manufacturing and in training, so that the nation can once more compete effectively and pay its way in the world.The Government are now embarked on a campaign of calculated deception. It is a campaign of deception about the state of the economy, about the impending crisis and about their own responsibility for bringing it about. The Government's friends in Fleet street are accessories to that fraud. This week The Daily Telegraph, the Daily Express and the Daily Mail all paraded sets of phoney figures, clearly taken down at dictation speed from the Chancellor's spokesman. I propose to give three examples of what those newspapers said and to look at the examples in some detail, leaving aside for a moment their repetition of the old deceits about job creation and reduction in unemployment. The Daily Express said:The latest retail figures confirm the strength of the consumer boom. In the fourth quarter of 1986 retail sales were 2.5 per cent. up on the previous three months and 7 per cent. up on the previous year.It did not go on to say that while consumer spending rose by 7 per cent. the production of consumer goods in Britain rose by only 2 per cent. To have added that would have demonstrated not the strength but the weakness of an economy about to slump into a £7.5 billion balance of trade deficit. [AN HON. MEMBER: "Rubbish."] It is not rubbish, because the figure of £7.5 billion is the Chancellor's and not mine. [Interruption.] I thought he read the statistics about this. The Daily Telegraph tells us that manufacturing output was at its highest level since 1980, but did not add that manufacturing output is still 4 per cent. below its 1979 level. Even on the Chancellor's own statistics and estimate, manufacturing output will not be at 1979 general election level by the time of the next general election. To have added such figures would have demonstrated not industry's success but the Government's abject failure.
My third example is from the Daily Mail, which tells us that the outlook for exports is bright. It cited motor cars 764 as an example but did not give any figures. It did not add that motor vehicle output fell by 5.1 per cent. in the last recorded year, and that it is now 29 per cent. lower than it was in 1979. If those figures had been given, they would have revealed the damage done to the motor industry by the medium-term financial strategy and by the total absence of any Government industrial strategy.
§ Mr. Hattersley
The campaign of deceit is as damaging as it is dishonest. In an attempt to create the illusion of success, the Government behave in a way which makes the crisis more certain and brings it nearer. The campaign of deceit is as callous as it is cynical, because in order to pretend in some parts of Britain that Government policies are succeeding, other parts have to suffer, and are suffering, wilful neglect.
No Government this century have so ignored the needs and so damaged the interests of the people whose votes they have already lost. Hence the occasional whine that we hear from Tory Back Benchers in marginal constituencies such as the hon. Members for Langbaurgh (Mr. Holt) and for Bury, North (Mr. Burt) who know that they, like the areas that they represent, have been written off by the Government.
§ Mr. Richard Holt (Langbaurgh)
Would the right hon. Gentleman care to comment on a BBC statement last weekend to the effect that since I was elected unemployment in my constituency has fallen by nearly 20 per cent?
§ Mr. Hattersley
I am almost as pleased to hear that as I am sceptical about the figure. It must be something about the hon. Gentleman's character and personality that makes his constituency a haven of success in a wilderness of Tory failure in the north-east.
§ Mr. Hattersley
I shall not give the hon. Gentleman a chance to say something else because I can tell him——
§ Mr. Deputy Speaker
Order. The hon. Gentleman must not persist if the right hon. Gentleman does not give way.
§ Mr. Hattersley
I hope that we shall hear from the hon. Gentleman and I shall give way to him again just as I did a moment ago. I wonder whether he will want to say anything after he has heard the Government and the Chancellor boast in this debate—having ignored the jobs that have been lost since 1979—about the jobs that have been created since 1983. Perhaps the hon. Gentleman has information about the jobs that have been created in Langbaurgh. I can tell the House only about jobs that have been created in the area of which his constituency is a part. Even on the Government's own figures, the north has been scandalously neglected since 1983 in the business of job creation. On the Government's own figures there are 446,000 new jobs in the south-east, but only 135,000 new jobs in Scotland, the north-west, the north, and Yorkshire and Humberside all added together.
§ Mr. Ian Wrigglesworth (Stockton, South)
The hon. Member for Langbaurgh (Mr. Holt) has mentioned the unemployment figures for his constituency. I have just received for this debate the figures for Cleveland county. In the county as a whole the unemployment figure is 20.8 per cent. and in Langbaurgh it is 16.5 per cent. That is considerably higher than in 1983 when the hon. Member for Langbaurgh was elected.
§ Mr. Hattersley
Since the hon. Member for Langbaurgh has become the fulcrum and the focal point of this debate, I have little doubt that you, Mr. Deputy Speaker, will wish to call him. If he is fortunate enough to catch your eye, he had better make his peace with his constituents and the statistics.
§ Mr. Hattersley
The hon. Member for Langbaurgh must know, as the House knows, that outside the magic triangle of the south-east Britain is short of jobs, public services, and amenities. Even within the south-east, areas which once relied on manufacturing industry—the decaying hearts of old cities in particular—are similarly and savagely affected.
At the same time, 9 million people, or 17 per cent. of the population, now live on or below the poverty line. That is an increase of families living below the poverty line of 47 per cent. since 1979. Against that background the Chancellor has set out his own priorities. I want to quote them to the House. On 5 January he told the Financial Times that his aim was to bring our top rate of tax down further. The following day the Daily Express, with typical eloquence and originality, copied the story. It described the same facts as "Lawson's dream" and said that his dream was a promised reduction in income tax for big earners. The Daily Express went on coyly to reveal that cutting income tax for big earners is part of the Chancellor's election strategy.
Let me tell the Chancellor now that if he wants to fight the next election on tax cuts, he can begin this afternoon by answering some direct questions on the subject, initially concerning his social priorities and the reason he wants to bring about those tax cuts. I ask him directly: why are tax cuts—let us say 2p off the standard rate at a cost of about £3 billion—more important than reopening hospital wards which have been closed because of cuts in the Health Service budget? Why are tax cuts more important than providing nursery school places, textbooks and the 16-plus maintenance allowance? Why are tax cuts more important than revising the housing investment programme, building houses for rent, and reducing the number of homeless families, the number of which has doubled under this Government to 100,000?
Why are tax cuts more important than restoring the link between the pension and average earnings and paying the pensioners the increase of which they have been cheated? Why are tax cuts more important than increasing child benefit and bringing the most effective form of help to the hard-pressed low-income families? Putting aside those social questions, which I know the Chancellor will not even attempt to answer, I ask him about unemployment.
§ Mr. Hattersley
I want an answer from the Chancellor, not from insignificant Members on the Back Benches.
§ Mr. Nicholls
On a point of order, Mr. Deputy Speaker. Is it in order for the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) to address me directly and then not give me a chance of intervening?
§ Mr. Deputy Speaker
I remind the House that this is a short debate and many hon. Members wish to speak.
§ Mr. Hattersley
Having asked the Chancellor questions about his social priorities, which I know he will not dare to answer, I want to ask him about unemployment. If he has £3 billion to spare in the next Budget, and if putting Britain back to work is honestly one of the things that he regards as important, why does he not use that £3 billion in the most effective way to secure that objective of lower unemployment? The Treasury's own model confirms that if job creation is to be the objective, public sector capital investment is twice as effective and public sector revenue spending is four times more effective than tax cuts, not least because it does not suck in the imports, about which the Chancellor ought to know something. If there is £3 billion to spare, why do the Government not use it to tackle or improve what their own National Economic Development Council called dilapidated Britain? We need to rebuild our old hospitals, replace decrepit schools, repair and extend our housing stock, extend our road systems and modernise our railways.
Why are not all those objectives, the urgent necessities of jobs, schools, pensions, hospitals and houses, more important than cutting 2p off the standard rate? The answer lies in the Government's well-known belief—indeed as far as the next election is concerned their well-known hope—that nobody with a conscience ever votes Conservative. Tax cuts are the wrong social choice. Nor are they the choice of a nation which wants to see a reduction in unemployment and improved social services. Nor are they the right economic option. Britain now faces a growing balance of payments difficulty. We are simply not paying our way in the world. I doubt whether even the Chancellor, with his well-known record of statistical integrity, will deny the facts on our balance of payments position.
The right hon. Gentleman now admits that the balance of payments will be in deficit by £1.5 billion this year, compared with the £3.6 billion surplus in 1985. Independent forecasters believe that even that admission is over-optimistic. The London Business School says the deficit will be £2.5 billion; Phillips and Drew says it will be £3 billion; the OECD says £3.2 billion, rising to £5.7 billion in two years' time; James Capel says £3.4 billion; the National Institute says £5.8 billion. The Treasury's own forecasts for 1986 have deteriorated from a surplus of £4 billion, which the Chancellor promised us in the autumn statement of 1985, to a surplus of £3.5 billion promised in the Budget debate, to a breakeven promised in the autumn statement of 1986. In March the Chancellor made the silly boast that, thanks to his policies, Britain had survived the reduction in oil prices "unscathed".
The price we have paid is a balance of payments which is now sliding into chronic deficit. The price we have paid 767 is a sterling which is already in crisis. The pound is being held on a life support system of the highest real interest rates in our history.
§ Mr. Hattersley
I shall give way to the hon. Member for Croydon, South (Sir W. Clark) in a moment. If he is not telling me that sterling is kept at acceptable figures only because we have the most damaging and debilitating highest real interest rate in our history and in the industrialised world, perhaps he will tell me why that is so.
§ Sir William Clark
I am grateful to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). Would he not agree that between 1974 and 1979, when his party was in government, each year there was a balance of payments deficit which totalled something like £4 billion over the four years? If one takes the balance of payments, the deficits and the surpluses over the past seven years, it can be seen that in the whole history of this Tory Government there has been a surplus of £23 billion.
§ Mr. Hattersley
I give the hon. Member for Croydon, South credit for knowing the answer to his own question. Oil is the answer to his question. This Government were washed to power on the prospects of a prosperity greater than anything this country could have anticipated without the oil. But the oil has been squandered. We ran a surplus on our manufacturing balance. Does the hon. Gentleman suggest that in the general election of 1979, when he and other members of his party were promising that if they were elected they would put everything right, he would have conceived for a second that, with the oil revenue now being enjoyed, the balance of payments would be back in deficit this year? Of course he does not believe that. It is back in deficit for the reasons I propose to describe.
Because of the deficit, sterling is being held up at acceptable levels only by a real interest rate which is deeply damaging to the economy. That is not simply the view of the Labour party. It is the view expressed yesterday by the CBI—not especially noted, certainly not this year, for supporting the views on the economy espoused from these Benches. But what it says about manufacturing industry, real interest rates and now what it actually said about tax cuts is a condemnation of the Chancellor's position.
§ Mr. Howarth
If the right hon. Gentleman even sets off down the road of embarking on his party's programme of increasing spending by £28 billion, what will happen to real interest rates?
§ Mr. Hattersley
Even the Chief Secretary is not hawking the £28 billion figure round any longer. He has had a rush of integrity to the head and has abandoned that figure.
§ Mr. MacGregor
The right hon. Gentleman might consider the integrity of his own figures. I have persistently urged him to make clear what he would withdraw from the £28 billion. He will know perfectly well that, although 768 some figures have been withdrawn, others have been added, which certainly make the £28 billion accurate and, if anything, an underestimate. It is up to the right hon. Gentleman to make his figures clear. I am not withdrawing that total until he does so.
§ Mr. Hattersley
The Chief Secretary asked for an independent assessment. He got one from the Institute for Fiscal Studies. The only problem was that it did not give the same answer as he gave. I am prepared to rely on the independent assessment. I do not believe that the Conservative party does itself any good in wanting to run away from the real issues by inventing figures which are now generally accepted outside the 1922 Committee as being wholly spurious and wholly unworthy of examination.
The reason we shall avoid the balance of payments crisis that I have just described is——
§ Mr. Hattersley
—that we shall concentrate on the real needs and the real economy. The Government have scandalously neglected those areas of the economy for which they do not have an emotional sympathy and a deep political interest. That is why the Government have concentrated so much in their economic management and fiscal strategy on the interests of the City of London and on those who work within it. That is why the Government are so reluctant to act against City fraud. That is why the Government are unwilling to operate an effective system of supervision over the financial institutions. That is why the Government are operating a monopolies and mergers policy which encourages merger mania, with all its waste of efficiency.
§ Mr. Hattersley
Some surprise has been expressed in the House and outside that the Secretary of State for Trade and Industry, who has now come amongst us, is not speaking in the debate, particularly since the motion specifically criticises him for failure to act over the recent proposed merger, abandoned today, but abandoned only after a great deal of time and effort had been wasted in both companies and, most important, after Pilkingtons had been forced to take a number of decisions to protect itself against the merger which are deeply damaging to the long-term interests of that company.
The Prime Minister announced today that the failure to refer the Pilkington bid was a victory for the swift resolution of the matter because, she said, had there been reference, the matter would have dragged on for weeks or possibly months. I give the Prime Minister credit for having said that by mistake, because she must know that the purpose of a tough monopolies and merger policy is to prevent unreasonable predators from making their strike in the first place. The Secretary of State for Trade and Industry must know, as I suspect, that a predator went into the Department to find out whether reference was likely. If he had been told that reference was likely, the proposal would have been abandoned two weeks, three weeks or a month ago and the damage that has been clone to Pilkingtons would not have arisen.
That being said, and surprised as I am that the Secretary of State for Trade and Industry should prefer to defend himself to a Back-Bench committee rather than 769 here, I do not believe that the personalities in this matter are the most important issue. Support for the City, for its greed, for its obsession with short-term speculation and for its sleazy undercurrent of corruption is the inevitable extension of Tory economic philosophy.
§ Mr. Michael Heseltine (Henley)
As the right hon. Gentleman knows, I have some sympathy with his worries about the uncertainties that the takeover process injects into the management of companies. However, can he explain how a manifesto behind which he will campaign, which threatens the whole of British industry with the spectre of the nationalisation proposals of his party, will improve that position?
§ Mr. Hattersley
I hope and believe that we shall write into our next manifesto the monopolies and merger policy which the last Labour Government put to the House a few months before their defeat—a tougher monopolies and merger policy than existed at the time, a tougher policy than exists now, and one which the Cabinet of which the right hon. Gentleman was a member scuppered because it was too tough for their friends in the City.
§ Mr. Hattersley
I have given way a good deal. Mr. Deputy Speaker has asked us to make progress; I still have a great deal to say, so I propose to say it without further interruption.
Clearly, as is demonstrated by the behaviour on the Conservative Benches, there is a great deal of panic within the Government about the monster that the big bang has created. Naturally, the panic about the reputation of the City rubbing off on them has been increased by the news from Morgan Grenfell today. Hence the off-record briefings about seven-year sentences and about Home Office crime squads. Hence the tough talk off the record about how the Government will behave in future.
The truth is that the Tory party cannot act against the City because the City reflects Tory values. As Tory values have deteriorated over the past 20 years the City has reflected that decline. Inevitably, support for the City has been matched by wanton neglect of manufacturing industry. That in its turn has done savage harm to Britain outside London as the interests of the regions and the interests of manufacturing industry are synonymous. We shall not get jobs outside London or in the decaying central areas by increasing the number of currency speculators, stockbrokers, or merchant bankers. We shall not solve any of our problems by changing Britain from the workshop of the world into the home of insider dealing.
What is more, the interests of the regions, of manufacturing and of the balance of trade are all identical. I know very well that the financial sector contributes £7.5 billion a year to our balance of payments but its policies and the policies which support it and which make that possible make it difficult for other sectors of the economy to operate efficiently. Indeed, the City is like an opening batsman, so obsessed with his own average that he does enormous damage to the team in which he plays and prevents the team from winning.
Those policies and the Chancellor's policies have done massive damage to manufacturing industry. 770 Manufacturing trade has moved from a £4.5 billion surplus in 1981 to a Government-estimated deficit of £7.5 billion this year. Manufacturing industry can no longer keep pace with demand for manufactured goods at home. Motor imports increased by 15.5 Per cent. between the third quarter of 1985 and the third quarter of 1986, and the import of other consumer goods rose by 19.5 per cent.
Our share of world trade had fallen since 1979 and our share of world manufactured trade has fallen massively by over 24 per cent. Indeed, manufactured output is still 4 per cent. less than in 1979. To be fair and honest, I must admit—[Interruption]—that four other countries have a worse record than ours for manufactured output since 1979. Those countries are Fiji, Argentina, Senegal and Barbados. I have nothing to tell the House about the capital expenditure of manufacturing of those four countries. However, even when leasing is included in the calculations, in Britain that figure is 18 per cent. less than in 1979.
The Chancellor will rise in a moment—[HON. MEMBERS: "Hear, hear."] I am not surprised that Conservative Members do not like the truth about the economy. However, they should rest assured that they will get the unremitting truth from Opposition Benches, day after day between now and the general election.
We know that there was a bit of an economic spurt a few months ago because we read of it yesterday in the Daily Mail. So it must be true. I find it pathetic that there should be so much rejoicing when a brief improvement does nothing more than increase output to 4 per cent. below its 1979 level, especially when it will soon be impossible to sustain even the illusion of economic strength. It cannot be sustained because, as well as facing a collapse in manufacturing and a deterioration in our balance of payments, we are now caught in the biggest credit explosion in our history.
§ Mr. Hattersley
I hope that the Chancellor will not deny the facts because they were given by the Governor of the Bank of England; they are not mine. Those facts reveal that Britain is being run like a pawnshop. Personal indebtedness increases at the rate of 20 per cent. per year. Personal credit now stands at almost twice the level to which it rose during the ill-fated Barber boom—a part of history that I thought had been removed from Conservative archives. Indeed, we may have the rehabilitation of the right hon. Member for Old Bexley and Sidcup (Mr. Heath), if we are to emulate the policies that preceded the 1974 general election, which in no small part resulted in the defeat of the Conservative Government, because it was realised then, as it will be realised now, that a consumer boom is a spurious indication of a nation's success. The present consumer boom is almost twice as high as the Barber boom of 1974.
In such a situation it would be criminally stupid to encourage increases in credit, suck in more imports and worsen the balance of payments by tax cuts. Therefore, as I know that the Chancellor will not explain his social reasons for cutting taxes, I ask him to explain the economic justification for making the tax cuts that I have no doubt will come about.
I hope that we shall be spared the hypocritical nonsense about lower tax rates yielding higher tax revenues. The increased revenues collected from the higher tax bracket 771 are not the result of harder work encouraged by lower marginal rates. They are the product of the widening divergence between the primary earnings of the rich and the primary earnings of the rest. It was not lower marginal tax rates that encouraged the chairmen of recently privatised industries to double their salaries the moment that they left the public sector. It was not tax cuts that produced those City salaries which the Chancellor described as looking like telephone numbers. To justify tax cuts as a way of making the rich pay more is greed dressed up to look like benevolence.
If the Chancellor disputes that judgment—I have no doubt that he will——
§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
I shall certainly dispute it.
§ Mr. Hattersley
The right hon. Gentleman has said that he will certainly dispute it, so I offer him the chance to prove me wrong. He has in his possession the Brown report on tax rates and their incentive effect. He has suppressed that report because it is not convenient to his case and it proves him wrong.
§ Mr. Lawson
I advise the right hon. Gentleman that that document, which originates from a commission during the period of office of the Labour Government and which he alleges that I have suppressed, has been in the Library of the House of Commons for over a month.
§ Mr. Hattersley
The right hon. Gentleman knows that it is not in its full and complete form and that in its full and complete form it will prove me right and him wrong.
§ Mr. Hattersley
What is wrong with it not being in its full and complete form is that, in its full form, it proves me right and him wrong. [HON. MEMBERS: "Withdraw."]
The Government do not have to act on unemployment because it is now beginning a genuine decline. The excuse given is that the Government have created jobs at such a rate that no change of policy is necessary. However, the truth is that we have lost a million jobs in this country since the Tory Government were elected. Recent claims about reductions in the number of people unemployed are largely the result of increases in the so-called schemes and measures.
There are 46,000 young people on youth training schemes and 55,000 people on unemployment schemes. None of those people is doing the real job that the Prime Minister promised in 1979. Few of them are doing real training to improve the skills of our work force which are desperately needed. Some of them, as illustrated last Thursday on the "This Week" programme on television that examined youth training schemes that were nominated for such examination by the Government, are carrying out tasks that are so inappropriate to modern industrial needs that they humiliate the participants and shame the Government who descend to such deceit to reduce unemployment.
§ Mr. Hattersley
We no longer have a thread of coherent and consistent policy from the Government. Instead we have cosmetics. We do not have a constant thread of industrial or fiscal policy from the Government. We have cosmetics. That is why, after seven years of boasting about public expenditure cuts—admittedly calculating the 772 numbers in different ways according to the Chancellor's convenience—we now have a year of public expenditure increases.
I should like to ask the Chancellor another question, still vainly believing that he might attempt some sensible answers. If the public expenditure increases are right this year, why were they wrong last year and why will they be wrong again next year? What is so special about this year apart from the fact that there will be a general election? That is why we shall have tax cuts, which are socially and economically wrong and unsustainable.
I must advise the Chancellor of something that he already knows: whichever party wins the general election, the tax cuts that he makes in this Budget will be reversed. I make it absolutely clear that we shall vote against tax cuts and that when we are elected we shall restore the level of taxation to approximately what it is now.
§ Mr. Hattersley
That is the truth about both parties.
However, as well as making tax cuts, the Tory party will make deep cuts in public expenditure. It is planning them now. The White Paper that was published two weeks ago reveals that the Government plan to cut public expenditure on the capital account. The difference between the parties on tax cuts and what follows is the Labour party's willingness to face the facts and the Conservative party's refusal to tell the truth.
§ Mr. Hattersley
The Tory slogan for the next election is, "Vote now, pay later". We know how the Chancellor will react to this sudden exposure to the truth. In a moment there will be long passages of bogus statistics, rather like those that I quoted at the beginning of my speech. [Laughter.] There will be passages of ritual abuse and the insistence that everything is for the best in the best of all free enterprise worlds. The Chancellor will ask the people to believe him when he says that, if he cuts taxes, he will not increase them again. Every Conservative Government in the recent past have been prepared to deceive the people over taxation.
The Government came to power in 1979 committed to cutting overall taxes and they repeated that promise four years later. Our total annual tax bill is now £29 billion higher than it was on the day when the Labour party left office. In 1955, a Conservative Government, who were in much the same position as the present Government, cut taxes within a few weeks of a general election and reimposed them a few weeks after the election.
If the House wants a more up-to-date example I shall gladly give it one. During the general election campaign in 1979 Labour Members warned that, once elected, the Conservative Government would double VAT. "Double VAT" was exactly the phrase that I used at a press conference at Transport house. The present Foreign Secretary could not have been more explicit in his denial. At Conservative Central Office on 21 April 1979 he said:We have absolutely no intention of doubling VAT.The Daily Mail, which tomorrow will undoubtedly dismiss any chants of crisis, listed the allegation that the Tory party would double VAT as a Labour lie. Within three weeks of the election, VAT was increased from 8 per cent. to 15 per cent.
The truth is that the Tory party has never been trusted over its taxation proposals when a general election has 773 been in the air. Conservatives cheated the country in 1979 and I have no doubt that given the chance they will do so again. Fortunately, that chance will be denied them.
§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:congratulates Her Majesty's Government on the success of its economic policies which have led to six years of healthy, balanced economic growth, have brought inflation down to its lowest levels for nearly two decades, have enabled industry to become more profitable than at any time since 1964, have brought the fastest productivity growth among major European countries since 1979 and have fostered the conditions in which a million new jobs have been created throughout the country since 1983.".This is not only the first economic debate of 1987; it is also the first since the tragically premature death of the Liberal party's economic spokesman, David Penhaligon. His breezy, good humoured, but always thoughtful contributions to our debates will be greatly missed. [HON. MEMBERS: "Hear, hear."] No hon. Member was more widely liked.
I turn now to the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). The fact that he has to resort to predictions of bad times just around the corner—I shall examine that proposition in a moment—is eloquent testimony that even the right hon. Gentleman in his heart of hearts at last recognises how well the economy is doing now.
We are now in our sixth successive year of steady growth, and still going strong. Year in, year out, we have been averaging getting on for 3 per cent. growth a year. Indeed, since the last election, ours has been the fastest growing major economy in the European Community; in sharp contrast to the 1960s and 1970s, when we were falling ever further behind.
We have achieved this while getting inflation down and keeping it down—a combination unknown for a generation. Inflation last year, at 3½ per cent., was the lowest for almost 20 years, and although this year it will be slightly higher than that, it will still be far lower than anything the last Labour Government even so much as aspired to, let alone attained.
Moreover, the growth that we have seen and that we shall continue to see has been balanced between consumption and investment. Indeed, for the whole of the period since the upswing began—[Interruption.] Opposition Members should listen to the truth. During the whole of the period since the upswing began, while consumer spending has risen at an average of 3 per cent. per year, investment has risen at 4 per cent. a yea—twice as fast as the European Community average. By contrast, under the Labour Government's brief upswing from 1975 to 1979, consumer spending grew twice as fast as investment. So much for the right hon. Gentleman's strictures about the balance between consumption and investment under this Government.
When we first took office in 1979, inflation was in double figures and accelerating fast. Not only have we brought it down dramatically, but our relative performance, although still not good enough, has markedly improved. Under Labour, the United Kingdom's inflation averaged seven percentage points more than in the world's 774 seven major industrialised nations as a whole. During the whole of our term of office so far, the inflation gap has been reduced to two percentage points.
§ Mr. Hattersley
Could we now have the proper comparison—the percentage difference between Labour and Europe and the percentage difference between this Government's inflation record and the European record?
§ Mr. Lawson
The comparison that I gave is the correct comparison, accepted by all the international economic bodies.
Or look at that other perennial British weakness of the past—our persistently low growth of productivity, which compared so badly with that of our major competitors. Here, too, the picture has been transformed, with productivity since 1979 growing faster in Britain than in any of our major competitors with the solitary exception of Japan.
Inevitably, in the short term, this sharp improvement in productivity, although badly needed—this was recognised on all sides of the political divide at the time—meant fewer jobs. But that phase is now behind us. During the present Parliament, the number of jobs has risen steadily, quarter by quarter, without a break—the best performance for almost 30 years. Altogether the number of jobs has grown since 1983 by more than a million—a bigger increase than in the whole of the rest of the European Community put together. [HON. MEMBERS: "Where?"] It is now clear from the latest figures that unemployment—I hope that Opposition Members will listen to this because they profess to care about unemployment—is now on a steady downward trend—[HON. MEMBERS: "Where?"]—something which the whole House will welcome.
What of exports and the external position of the British economy? Since the upswing began, while most of Europe has seen its share of the world markets decline, ours has held steady and exports continue to rise fast. As for the external position as a whole, this is now the strongest that we have known at any time since the war. Our net overseas assets are second only to those of Japan—a far cry from the relative pittance the present Government inherited in 1979.
It is against that background that we have to assess the fact, which assumed such momentous proportions in the speech that we have just heard from the right hon. Member for Sparkbrook, that our balance of payments is now in deficit on current account. Once again, the contrast with the Labour years is instructive. During the whole of Labour's period of office there was a cumulative deficit on current account which is now put at some £5 billion. During the first seven years of the present Conservative Government, we were continuously in surplus, to a cumulative total of £21 billion. [Interruption.] Those are the facts.
Since then, the collapse of the oil price has for the time being pushed us into deficit, but that was only to be expected. It is clearly arithmetically impossible for every economy in the world to be in surplus every year, even though it is not necessary to be in deficit four years out of five, as the Labour party was when it was in office.
What matters is that we should keep control of our domestic costs, so that the exchange rate adjustment which has followed the oil price collapse and which is now completed will lead in time to a compensating 775 improvement on our non-oil account, both visible and invisible. In this context, the most recent figures for the growth in the United Kingdom's unit labour costs are most encouraging.
Of course, good news for the British economy is clearly bad news for Labour. The right hon. Member for Sparkbrook is determined that there is a disaster in the offing. The trouble is that we have heard his predictions before.
In May 1983, he confidently predicted that inflation would rocket after the election and within a year would be in double figures. That is what he said. The outcome was that a year later inflation was 5 per cent. Of course, it has since fallen further still. That was Old Roy's prediction for 1983.
He was at it again at the end of 1984, warning that over the next 12 months we faced what he described as a "slump"—I quote his very word, that is what he forecast. The outcome was that in 1985 we grew faster than any other country in Europe.
He was at it again in 1985, confidently predicting lower living standards. That is what he was predicting then. The outcome was that living standards rose to record levels and they are still rising. Indeed, the right hon. Gentleman is complaining that they are rising too fast.
Now, of course, the right hon. Gentleman is predicting an economic crisis. No wonder share prices have risen sharply since the latest gipsy's warning first hit the Reuter screens. The markets have learned from long experience the precise value of the right hon. Gentleman's predictions of gloom and doom.
§ Mr. Lawson
The plain fact is that, leaving aside the risk of a world economic crisis, which did not appear to be what the right hon. Gentleman had in mind, the only thing that could precipitate an economic crisis in Britain would be the election of the right hon. Gentleman and his colleagues to office.
§ Ms. Clare Short
I am grateful to the Chancellor for giving way. He has put his finger on the spot and he has shown the division between the view on Conservative Benches and that on Opposition Benches about what is a healthy economy. The Chancellor's view of a healthy economy is governed by share prices, ours by jobs for people and long-term wealth for the economy.
§ Mr. Lawson
I have already mentioned jobs. That is something which this side of the House attaches great importance to. I am sure that the hon. Lady will welcome the fact that there are now over 1 million more people in work in this country than there were at the time of the last general election.
Of course, economic crisis is what we always associate with the Labour party. That is what occurred when the Labour party was last in office. It is instructive, as we have just published our public expenditure White Paper which my right hon. Friend the Chief Secretary to the Treasury will be opening a debate about in due course in the House, to look back at Labour's public expenditure White Paper of 1977, published exactly 10 years ago this month.
The conduct of economic policy, as the House will recall, had by then been handed over to the International Monetary Fund to which the Labour Government had 776 had to go, cap in hand, the previous September, as they became engulfed in the worst economic crisis since the war. The balance of payments 10 years ago this month was in deficit. Inflation stood at 16½ per cent. Productivity growth, according to the White Paper, was barely two thirds of the average for the major OECD countries. Strikes were rife. The public sector borrowing requirement had been allowed to rise to the equivalent, in today's terms, of £35 billion. To recover from this, the White Paper announced plans to cut public expenditure by the equivalent, in today's terms, of £4 billion. Not only were the cuts savage, but they were concentrated heavily, if not exclusively, on capital spending.
From its inception in 1974 to the IMF crisis of 1976, the Labour Government had boosted current public expenditure by a staggering 17 per cent. in real terms. When they were forced to cut, the Labour Government found themselves unable to undo the current spending spree they had unleashed, and savaged capital spending instead.
As a result, during the whole of their time in office, public sector capital spending fell by 25 per cent., with capital spending on the Health Service slashed by more than 30 per cent. and on major roads by almost 35 per cent. That was the inheritance of devastation that we had to make good—as we have been, with spending on major roads up 30 per cent. and on hospitals up by 31 per cent. in real terms since 1979.
§ Mr. Lawson
Since the Leader of the Opposition mentions housing, I will add that spending on housing renovation is up by over 50 per cent.
So much for the right hon. Member for Sparkbrook's cant about the public sector capital stock which his Government ran down and which we have been seeking to rebuild.
However, I have to concede that the right hon. Member for Sparkbrook was on stronger ground when he spoke about the differences in prosperity in different parts of the country. For there are undoubtedly regional and local variations, just as there always have been and just as there are in other industrial countries. One clear reason for this is the pattern of industry that history has left us. It is not a simple matter of north versus south. There are prosperous parts of the north just as there are areas of dereliction in the south—and I speak as a midlands Member which, according to the Labour party definition, places me in the north.
§ Mr. Lawson
But, in general, jobs have been hardest hit wherever the local or regional economy was most heavily dependent on traditional manufacturing industry—not because all such industry is in decline, although some is.
§ Mr. Lawson
In a moment. But even those manufacturing industries not in decline have expanded their output while reducing the number of workers employed. In general, traditional manufacturing industry tended to locate itself in the midlands and the north. If the problem has been more acute in Britain than in most other 777 countries, that is only because, thanks to Labour policies, our manufacturing industry was the most heavily overmanned to start with.
§ Mr. Kinnock
Does the shift in the industrial pattern of development which the Chancellor has described with some accuracy explain the fact that since 1979 our trade in high-tech products has moved from a surplus of £1 billion to a deficit of £2 billion under this Government?
§ Mr. Lawson
The matter that I am talking about has nothing to do with our trade in high tech. Our exports of high tech have been increasing very substantially.
§ Mr. Lawson
I have given way once. I will give way again but not now.
The difference to which I have alluded is also an inner-city problem and once again most of the big industrial cities are in the north. This Government have taken a whole battery of measures to help those parts of the country that have suffered from the highest levels of unemployment.
§ Mr. Lawson
I will finish this passage first.
Regional assistance, although reduced in overall size, has been much more closely targeted on jobs. We have multiplied spending on top of that on specific employment and training measures tenfold and this massive expenditure has in practice been heavily skewed towards the north. We have also greatly expanded urban developmnt grant spending, where each £1 of public money has levered in £4 of private sector financing. My right hon. and learned Friend the Paymaster General, when he winds up, will mention some of the other initiatives that we have taken.
§ Mr. Campbell-Savours
Is the Chancellor aware that, in the words of the Confederation of British Industry, one of the biggest impediments to regional growth is the two-month moratorium that has been introduced on the payment of regional development grants? Is he further aware that people in industry all over the country are complaining, and that that moratorium is having a devastating effect on regions such as mine in Cumbria? Will he get together with the Secretary of State for Trade and Industry and reconsider the matter, rescind it and ensure that development takes place and that the grants are paid when they should be paid?
§ Mr. Lawson
If the hon. Gentleman had looked at the White Paper published earlier this month, he would have seen that provision for regional expenditure had been increased. There is an obstacle that we have come up against time after time. That has been the behaviour of hard Left Labour local authorities.
§ Mr. Lawson
I have just given way.
As Robert Kilroy-Silk—a name known to Opposition Members—said in his latest book:The Militants and their ilk in Liverpool are the biggest deterrents to job creation on Merseyside that there have ever been.778 The same goes for other anti-business Socialist local authorities up and down the country. Time after time that is the problem.
§ Mr. Lawson
Although manufacturing output overall is rising strongly, the decline in employment in the traditional manufacturing industries is unlikely to reverse itself fully, and to the extent that it does, there is likely to be a constant drift from the cities to the outlying areas. How, then, to attract new firms and industries—manufacturing as well as service industries—to fill the gap? Certainly not with councils such as that of Liverpool. Nor is that the only one.
§ Mr. Hattersley
The right hon. Gentleman must have misheard my hon. Friend the Member for Workington (Mr. Campbell-Savours). He asked the specific question, why a moratorium and how can he justify it? Will he answer that now?
§ Mr. Lawson
It is not a moratorium. It is a delay in payment that allows a significant increase in regional assistance over what was previously planned. That is clearly stated in the White Paper.
I say this in all sincerity to the right hon. Member for Sparkbrook and Opposition Members: it does not help to imply, as the Opposition all too often do, that the whole of the north is a disaster area, a picture of industrial devastation. That is just the sort of image that does the most damage to the north and, of course, it is not true either. The revival of the hard-hit regions of our country will come about only on the basis of enterprise, whether local or coming in from outside. The Government's task is to create, so far as local government allows us to, the climate for enterprise of that kind.
§ Mr. Wareing
Is the right hon. Gentleman aware of a survey that was recently carried out for the Institute of Directors? The members of the institute were asked which of 11 different factors they thought were the cause of lack of investment and whether they were relevant to business locational decisions. Local authority rates appeared to be the eighth factor among the 11. Most of the problems were related to locational factors, having no bearing whatsoever on the activities of local authorities. That includes Liverpool, where some people, including the Government, think the rates have been kept too low. That is why councils are currently facing the law.
§ Mr. Lawson
I regret having given way, because that was more of a speech than an intervention. If the hon. Gentleman thinks that business men, particularly small business men, are indifferent to the level of local authority rates, he is not living in the real world. He is even more living in cloud cuckoo land if he thinks that the only anti-business practice of some Labour local authorities—not all—is high rates. There are many other impediments that they put in the way of business, including the refusal of planning permission and so on.
§ Mr. Campbell-Savours
On a point of order, Mr. Deputy Speaker. You will have heard the Chancellor make a statement about the controls on regional development grant not being a moratorium. May I refer you to page 93 of the White Paper, which the Chancellor said that I had not seen? That page refers specifically to moratoria—
§ Mr. Deputy Speaker
Order. The hon. Gentleman knows perfectly well that that is a matter for debate, not a point of order.
§ Mr. Lawson
I am well aware of what is in volume II of the White Paper and I stand entirely by what I said.
Fortunately, all the signs are that employment prospects have improved considerably in the north as well as in the south, as the economy surges forward.
§ Mr. Tony Marlow (Northampton, North)
My right hon. Friend said that there were other habits and actions of Socialists that caused problems with employment. Has my right hon. Friend seen the document from the Library that sets out the level of unemployment by constituency? Is he aware that there is a close correlation between high levels of unemployment and Socialism? For example, in London the 11 constituencies with the highest levels of unemployment all have Labour Members of Parliament and they all have Socialist local authorities. Is it not the case that the main creative force behind unemployment is Socialism?
§ Mr. Lawson
As usual, my hon. Friend makes a telling point.
My own local paper, the Leicester Mercury, which I was looking at on Thursday, carried 17 pages of job advertisements. That is substantially up on a year ago. I had some inquiries made——
§ Mr. Lawson
I am talking about jobs, which the hon. Gentleman professes to be concerned about—[Interruption.] The hon. Gentleman clearly does not care about jobs.
I had inquiries made of some other leading provincial newspapers. Job advertising in the Manchester Evening News last week was 11 per cent. up on a year ago. For the Newcastle Evening Chronicle the increase was around 30 per cent. For the Birmingham Evening Mail, there was a rise of 40 per cent. in jobs advertised, and from the Sheffield Star, an estimated 50 per cent. increase in the number of jobs advertised compared with a year ago.
Lastly, in this context, given the terms of the Opposition's motion, let me add that there is no evidence whatever that industrial mergers have any responsibility for regional and local differences in employment. The right hon. Member for Spark brook referred briefly to the BTR bid for Pilkington. I understand that it must be galling for him to find that his fox has been shot. The plain fact is that my right hon. Friend the Secretary of State for Trade and Industry correctly accepted the clear advice of the Director General of Fair Trading that the proposed merger did not raise significant competition issues. BTR's withdrawal from the bid this afternoon in the light of Pilkington's dramatically improved profit forecast is equally clear vindication of the Government's view that other issues are generally best left to the verdict of the market.
As for "merger mania"—I quote from the motion tabled by the Opposition—I pause merely to observe that in the 1960s that was precisely the declared industrial policy of the Labour Government through the agency of the so-called Industrial Reorganisation Corporation.
§ Mr. Lawson
I must get on with my speech.
I turn now to the City, because the right hon. Member for Sparkbrook referred to the City at some length in his 780 speech. While employment in manufacturing has been declining, in the service industries it has been steadily growing, and nowhere more so than in the financial services industry. Over the past five years, the numbers employed in the financial services industry have been growing at the rate of 5 per cent. a year, to reach 2½ million at the latest count. The contribution of the financial sector to Britain's invisible trade surplus is now running at some £7½ billion a year.
By no means all of that is concentrated in London. Edinburgh, for example, is a major financial centre in its own right, and Scotland now employs more people in the financial services industry than in steel, coal mining and shipbuilding put together. But there is no doubt that it is London that is the pre-eminent financial centre, not merely of the United Kingdom but of Europe and, arguably, of the world.
To maintain that position, it is essential that London zealously preserves its worldwide reputation for integrity and probity, and we have taken effective steps to that end. Soon after taking office, we legislated to make insider trading illegal, which it never was under Labour, and we are now giving urgent consideration to making it an arrestable offence.
§ Mr. Lawson
I shall give way in a moment.
Following the report of the Roskill committee, we are strengthening our armoury against financial fraud, with the setting up of a new serious fraud office, changes in court procedures to make it easier to bring charges and to present evidence, and increases in the penalties for fraud and corruption, all with precious little help, I have to say, from the Opposition.
§ Mr. John Smith
Before the Chancellor's imperfect recollection leads him into greater error, let me remind him that in 1978, as Secretary of State for Trade, I introduced a Companies Bill that made insider trading a criminal offence. If we had had co-operation from the Conservative Opposition at the time, the Bill would have been on the statute book before the 1979 general election. The Companies Act 1980 followed the provisions that the Labour Bill introduced to the House of Commons. Will the Chancellor now withdraw what he said?
§ Mr. Lawson
I shall withdraw nothing. As the right hon. and learned Member has owned up, the last Labour Government had a deathbed repentance. Right at the end of their term of office, they suddenly got around to the question of insider trading. They were never able to get it on the statute book during their period in office—[Interruption.]
Of course, we have also put on the statute book the new Financial Services Act to ensure the effective regulation of the securities industry. How this will work out in practice it is still too soon to give a final verdict. Many aspects of the Act are not yet in operation. However, let no one be under any illusion that there is anything soft about the regime that it introduces. Although built on the foundation of the City's traditional pattern of self-regulation, it is a fully statutory system, and one which, incidentally, gives inspectors appointed by the Department of Trade and Industry far more power than is possessed by the SEC in America. That is a fact.
§ Mr. Rogers
Before the Chancellor concludes his remarks, will he give the House details of the number of inspectors who look for or follow up allegations of fraud in the City of London, compared with the number of inspectors who look for social security fraud?
§ Mr. Lawson
If the hon. Gentleman has any evidence or suspicion of fraud, will he please give it either to me or to my right hon. Friend the Secretary of State for Trade and Industry, and appropriate action will be taken. If the hon. Gentleman has no such evidence, he should not pretend that there is anything going on there.
§ Mr. Lawson
I shall not give way.
I give the House this assurance: the Government are determined to act promptly and effectively whenever such action is warranted, and this has been amply demonstrated by the decision to put DTI inspectors into Guinness, and by the developments that have already occurred as a result. I give the House a further assurance: should the Guinness inspectors at any time uncover any evidence that would warrant a criminal prosecution, that evidence will be passed on to the appropriate authorities, irrespective of whether the inspectors have completed their own inquiries.
Attention has also, inevitably, been directed to Morgan Grenfell, Guinness's financial advisers. As a bank, Morgan Grenfell is subject to the supervisory authority of the Bank of England and to the terms of the Banking Act.
The Bank of England was closely involved in setting up and determining the terms of reference of the high-level internal inquiry into the management of Morgan Grenfell, which was announced last week and, at the governor's suggestion, the inquiry team is now to be strengthened by the addition of a senior independent auditor. The group chief executive of Morgan Grenfell and the director at the head of its corporate finance division have today announced their resignations, and an executive committee of the board will manage the group pending the appointment of replacements. Meanwhile, the governor of the Bank of England has asked for an interim report by the end of this month, in the light of which the Bank of England will decide whether further action is required.
Any information suggesting criminal activity will, of course, be passed promptly to the appropriate authorities. In particular, the Bank of England is keeping both me and the Department of Trade and Industry fully informed.
Ours is the party of law and order, and this Government are determined to do all in their power to prevent, to detect and to punish wrongdoing, wherever it may occur.
§ Mr. David Clelland (Tyne Bridge)
Will the Chancellor care to tell the House when was the last time, before the Government came to office, riots occurred in the inner-city streets?
§ Mr. Lawson
I regret that there are many occasions of riots in our long history, but I am glad to say that none is taking place at present.
But it is important that, serious though the matter of City wrongdoing is, we keep it in perspective. As the hon. Member for Dagenham (Mr. Gould) at least has 782 conceded, the guilty are a tiny minority. The overwhelming majority of those who work in the City are honest and are as eager to root out the wrongdoers and their practices as anyone in this House.
The attempt by the right hon. Member for Sparkbrook to smear the entire City with guilt by association, describing it as "sleazy", "seedy", "an alien force" andthe least reputable sector of the economyis wholly false and insofar as anyone believes him—which may not be many—highly damaging to this country, for which the City's reputation is a priceless national asset. Indeed, if the truth be told, it is the very success of the City in the world market that the Labour party cannot abide. For Labour is comfortable only with failure. Indeed, Labour Members understand nothing else. They knew nothing else but failure when they were last in office, and would condemn our country to even greater failure were they ever to return to office.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
Of course we are pleased with the successes in the City of London. Is the right hon. Gentleman aware that, without the Ivan Boesky affair, and without the SEC in the United States, it is doubtful whether any of these allegations would have been made, let alone the facts discovered?
§ Mr. Lawson
The right hon. Gentleman should have the courage to concede—he knows more than his colleagues on the Labour Front Bench—that we have acted promptly and effectively in each of these cases and in every case that has come to light.
What is the Opposition's economic prescription? The right hon. Member for Sparkbrook has, I concede, by his standards been relatively honest and open about it. It is higher Government spending, higher borrowing and higher taxes. He has made that plain.
Let me take each of them in turn—first, spending. How much higher spending, and how is it to be financed? As my right hon. Friend the Chief Secretary has once again today pointed out, Labour's spending pledges add up to at least an extra £28 billion a year. How on earth do they imagine that they are going to finance that? I know that the right hon. Member for Sparkbrook tries to slide away from the £28 billion, by talking as he did today—or he has on previous occasions at any rate—of Labour's £3½ billion poverty package and £6 billion jobs package. Does that then mean that he is resiling from Labour's repeated promises to spend more on education, more on the Health Service, and more on overseas aid, to name but three? Will he answer? I will gladly give way to the right hon. Gentleman. The right hon. Gentleman is struck dumb. He is not able to answer. Hon. Members will draw their own conclusion that the £28 billion still stands.
Let us give the right hon. Gentleman the benefit of the doubt. Let us suppose that he is resiling from all these pledges on health, education, overseas aid and the rest because they do not come in either the jobs package or the poverty package. Let us suppose that he is resiling from them and many others. I remind the House that to pay for the £28 billion of additional public spending——
§ Mr. Lawson
I am not surprised that the right hon. Gentleman does not like this. It would mean a basic rate of income tax of 53p in the pound.
783 Let us suppose that the right hon. Gentleman has won his desperate battles with his pledge-happy colleagues. How is the £9½ billion to be financed?
§ Mr. Lawson
In a moment. Some £3½ billion of it, we are told, will be financed by reversing the reductions that the Government have allegedly made in the taxation of the higher paid and the rest by an extra £6 billion of Government borrowing. It beggars belief. The right hon. Member for Spark brook claims that the economy is overheating, that interest rates are too high and that there is a crisis round the corner, and he blithely proposes to borrow an extra £6 billion.
§ Mr. Hattersley
On this exact question, I spent, I think, the first quarter of an hour of my speech telling the Chancellor that we believed that if he had £3 billion to spend it would be better spent on education, health, pensions and housing than on tax cuts. I ask him to tell the House why he thought that tax cuts were a better choice than health, education, pensions and housing. That is the issue. Will the right hon. Gentleman explain the answer now?
§ Mr. Lawson
The point is the one I put to the right hon. Gentleman.
It is not even as if the so-called poverty and jobs packages consisted exclusively of capital spending. At least three quarters of the proposed total would be on current spending. So why does not the right hon. Gentleman take the honest course and admit that every penny of it would have to be raised by higher taxation on ordinary working people? Why does he not admit that? Is not the whole of the Opposition's case, which we heard again today, that public expenditure is in every way preferable to private expenditure and that the burden of taxation is of no consequence? Is that not their proposition? Why not at least have the virtue of consistency and promise to restore the basic rate of income tax from the present level of 29p to the 33p which we inherited from Labour? I wonder why the right hon. Gentleman does not promise that.
Apparently, as far as the right hon. Gentleman is prepared to go, at least until now, to promise, in the spirit, he says, of Mr. Walter Mondale, to undo any tax reduction that there may be in this year's Budget. I do not know whether there will he any tax reductions in this year's Budget. All I shall say is that the Budget this year will be on St. Patrick's day. [Interruption.] That is informing the House of the date of the Budget.
But the whole country must now be clear about the difference both in policy and in philosophy between the Government and the Opposition. The Government believe in reducing the burden of income tax on ordinary working people and the Opposition believe in increasing it.
As for Mr. Mondale, I can do no better than quote from the leading article in The Guardian—not a newspaper that supports the Conservative party. The article states:Mr. Walter Mondale, with energy and some honesty, based his entire 1984 American Presidential strategy on playing the spectre at the economic feast. He won only Minnesota. His candidature was a fiasco. The voters did not want to hear about the bad times that might follow the good times. They did not want to vote themselves immediate tax increases. Nor, if times were indeed going to turn sour, did they think that big spending Democrats were the natural first port of call. Mr. Mondale may have made a sincere pitch. But it was not, when the campaign actually got going, an effective or resonant pitch. It was a disaster.784 The Labour party is, indeed, a disaster. The only bigger disaster would be a Labour Government.
I welcome this debate. It has been rather a long time coming. The Opposition emerged from their Bishop's Stortford conclave claiming, to quote the right hon. Member for Islwyn (Mr. Kinnock):The Election will be about the economy. Our campaign from now until election day will therefore be about this central issue.Excellent—but what happened? They fell at the first fence last Wednesday, not because of cold weather but because of cold feet. Since then, all we have had are further figures showing that the economy is in excellent shape The prospects for 1987 are very good and I invite the House to reject the Opposition's absurd motion with the contempt that it deserves.
§ Mr. Ian Wrigglesworth (Stockton, South)
The Conservative party has been in office since 1979. We are entitled to judge its record on the basis of what has happened not since 1981 or 1983 but since 1979. Just as the Chancellor is happy to fight the general election on the Government's economic record, so, too, is the alliance. The central feature of economic policy and the central failure of the Government's policies is unemployment.
Since 1979, the number of long-term unemployed has increased fourfold from 300,000 to 1.36 million. I hope that during this debate we will not become too embroiled in percentages and big figures but will consider the implications of those figures. That is why I chose to start with the figure for long-term unemployment of about 1.3 million. In my constituency and in the rest of the north that means a very large number of families who have been suffering considerable deprivation, hardship and misery for a very long time. If the Chancellor is proud of his economic record and of recent economic events, he should spend a little more time not only in the northern region but in other parts of the country that have been hit by the scourge of unemployment in an unprecedented way since the Conservative party came to office.
On the basis of the way in which unemployment was calculated previously, there are at present some 3.7 million people unemployed. The Chancellor should remember that any comparisons that he wishes to draw to the attention of the House should be on that basis, unless he is prepared to reduce the old figures to compensate for the changes made by his Administration.
The long-term unemployed figures are higher than during the 1930s depression. There were some 483,000 long-term unemployed in 1933. By 1939 the number had been halved. It is an appalling fact that the Government have not merely matched the levels of unemployment in the 1930s but have beaten those levels time and time again.
We have heard much from Conservative Members about the number of new jobs created. The Chancellor, along with many of his supporters, has been preaching about the million new jobs which are supposed to have been created in recent years, but let us consider the actual record. There are now 1.6 million fewer jobs than in 1979 when the Conservative party came to office. Let us consider a different figure from the Government propaganda claim that about a million new jobs have been created in the past three years. According to the Bank of England, the number of full-time equivalent new jobs created in the past three years is only about 239,000. That 785 contrasts vividly with the constant stream of propaganda—that is what it is—that we get from the Chancellor, the Prime Minister and other Ministers. For the benefit of the Chancellor, I repeat the Bank of England figure—239,000 full-time equivalent new jobs in the past three years. That is merely scratching the surface of the problem.—[Interruption.] I do not care if that figure has been revised by a minor amount, the fact remains that the figure given by the Chancellor and his colleagues is deliberately and grossly misleading. There are now 1.6 million fewer jobs in Britain than when the Conservative party took office.
§ Mr. Jim Craigen (Glasgow, Maryhill)
Does the hon. Gentleman agree that the steep rise in part-time employment considerably masks the failure of the Government's employment policies?
§ Mr. Wrigglesworth
I entirely agree with the hon. Gentleman. When the Government boast about all those new jobs they are really talking about a whole range of part-time jobs. For the unemployed and the long-term unemployed such jobs are meaningless. That is why I have referred to the Bank of England figure of 239,000 full-time equivalent jobs. That is the true record of the Government's job creation programme since they came to office.
§ Mr. Edward Leigh (Gainsborough and Horncastle)
This is all very interesting but the House would be interested to know whether the hon. Gentleman is still committed to what he told fellow alliance Members—that that they should spend £10 billion. Surely that would mean an income tax rate of 38p in the pound and a VAT rate of 26 per cent. How would that help job creation?
§ Mr. Wrigglesworth
I will come to our proposals shortly, but the hon. Gentleman must get his facts right. The sum of £10 billion would be spent over our period in government, not in one year as the hon. Gentleman seeks to imply.
Let us consider manufacturing output——
§ Mr. Wrigglesworth
No, I cannot give way. Mr. Speaker has implored us to be brief because other hon. Members wish to speak.
We have heard the Government's boasts about the growth of the economy in recent years. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) referred to the fact that the Chancellor had trumpeted about levels of production getting back to 1980 levels. What an incredible thing to boast about—getting production levels back to the figure reached the year after they came to office. What an achievement!
The decline in manufacturing output is the cause of our economic problems. Production levels are still 6 per cent. below 1979 levels. We have made absolutely no progress—we have gone backwards. In the eight years since the Conservatives took office we have still not reached the levels of production in the manufacturing industries that existed in 1979. We are still struggling to get back to the 1979 levels. Goodness me—even with the three-day week the manufacturing sector did better than it has done since the Government took office.
786 We have heard a great deal about the reason for the decline. We are told that the international economic situation has led to Britain and other countries to be hit in exactly the same way—what poppycock! It is simply not true that manufacturing employment in other countries has been so hard hit. Since the Conservative Government took office we have lost 28 per cent. of the work force in manufacturing industry.
§ Mr. Wrigglesworth
No, I will not give way. Almost 30 per cent. of the work force in manufacturing industry has gone.
§ Mr. Wrigglesworth
No, I will not give way.
Let us consider comparisons with other countries. In Japan there has been a 4.9 per cent. increase in manufacturing employment. In the United States there has been a drop of 2 per cent., in Canada 1.4 per cent., in West Germany 8.5 per cent. and in Italy 9.4 per cent. Incidentally, Italy has now overtaken Britain in terms of wealth per head of population, so in comparison with the original Common Market countries we are last in the league table. Our manufacturing employment is down by 28 per cent. and the worst comparison that we can draw is the 9.4 per cent. drop experienced in Italy. Britain's declining manufacturing industry is a direct consequence of the Government's policies.
It is no good the Chancellor trying to tell the House that the decline is due to our industries not performing as well as those of other countries. [HON. MEMBERS: "What about steel?"] In 1979 Britain produced 21.5 million tonnes of steel. Now, after seven years, the magnificient achievement of that industry is a total tonnage of 15 million. That is an illustration of the state of the economy and of our manufacturing industries. We are producing six million tonnes less than we did in 1979.
§ Mr. Holt
I am glad that the hon. Gentleman is discussing steel because this morning I went to Steel House to discuss this matter with some senior executives. In my constituency in the north-east and in the constituency of the hon. Member for Redcar (Mr. Tinn) there are 50 per cent. fewer employees than six years ago but the steel industry there is producing 120 per cent. more steel than in the past.
§ Mr. Wrigglesworth
We have heard all the boasts from the Chancellor and other Ministers about how the economy has picked up, but if we consider the production of bricks, steel and raw materials that go to make up the true economy we find that we are well behind the production figures that prevailed in 1979.
§ Mr. Wrigglesworth
No, I will not give way.
Such a decline in production has implications for my region and the whole question of the north-side divide. This row has been hovering about for a number of years, but it really began with the publication of the Department of Employment census showing that 94 per cent. of total job losses had occurred in Scotland, the north, the 787 midlands, Wales and Northern Ireland. It would be nonsense to suggest that unemployment is a problem only in the north and not in the south. Some areas in the south have been equally hard hit, just as some areas in the north, even in my constituency, are as prosperous in terms of income and housing as some areas in the south.
Nevertheless, overwhelmingly more people are unemployed in the north because the economy of the north has been dominated by old manufacturing industries which have been slipping into decline over a long period. That decline has been accelerated dramatically by Government policies. An inevitable consequence of Government policies and of the decline in our manufacturing base has been that the major manufacturing areas of Britain have been the hardest hit and have paid the price for the Government's policies.
If Conservative Members do not accept that that situation is a consequence of their policies, I refer them to the period when the right hon. Member for Leeds, North-East (Sir K. Joseph) became Secretary of State for Trade and Industry. It is remarkable how short their memories are. Some Opposition Members remember with amusement but also with dismay the reading list—Adam Smith and various other authorities—that the right hon. Member circulated to his civil servants about how manufacturing industry was not really important to the country and how the service sector would pull the economy, industry and the country up by the boot straps so we did not need to worry about manufacturing industry. That was the philosophy that the Conservative party introduced in 1979 when they took over the reins of power. The consequences of dismantling previous policies, many of which had been put on to the statute book under the Industry Act 1972 by the then Prime Minister and his colleagues, are there for all to see.
During this Government's period of office, employment in the south-east, East Anglia and the south-west has grown by 367,000, if the self-employed are included in the figure, but in the rest of Britain 1,047,000 jobs have been lost. As a percentage of the work force, registered unemployment has risen far more in the north than in the south. The figures and the census to which I referred earlier show that. One need only look at the Government's submission to the European Community's regional development fund showing that the regional disparity has widened in the past 20 years and that the worst hit regions in the United Kingdom are over-represented among the worst hit regions in Europe. We have five of the 12 highest unemployment regions in the European Community—Northern Ireland, Merseyside, Dumfries and Galloway, Strathclyde, Northumberland, Tyne and Wear and Cleveland. The only parallels are southern Italy, Sicily, Sardinia, Corsica and Ireland. Of the worst 30 regions, the United Kingdom has 10. We are far and away the worst hit area in the European Community. We have the worst regional pockets of unemployment in the whole European Community.
§ Mr. Wrigglesworth
No, I really must not give way again.
The situation that I have described is not surprising. The manufacturing sector has been predominantly in the regions and it is from that sector that we have lost the most jobs.
788 There is an overwhelming case for devolving far more power, authority and resources to the regions. The City plays a very important role, but it could make a much greater contribution to the regions than it does today. The malaise in the City is debilitating the financial institutions and our economy. It is also debilitating industry and commerce. An honest and open City would be a national asset, but a corrupt City is a national liability. Alliance Members have said before that the Government have not given enough independence to the newly established Securities and Investments Board to enable it to carry out its role as the City watchdog. We should like it to have more independent members and I moved an amendment to the Financial Services Bill to that end. We should also like it to be financed and supported not by the City but by Government funds. It should be seen as a body that is independent of the City and not as one that belongs to and is dominated by the City.
In the light of recent events, the City is undoubtedly on trial. There have been too many scandals. I accept that a minority of people in the City are causing those scandals and behaving in an unacceptable way, but many people who have known the City for many years are becoming worried that that minority is too large and that too many people and institutions in the City have been infected by this sort of corruption. It is to be hoped that the Chancellor of the Exchequer and the Secretary of State for Trade and Industry will bring their investigations to a speedy conclusion so that this boil can be lanced and the good name of the City restored.
It is also important that the Civil Service should be above any reproach or doubt. I was disturbed by a report in The Times this morning that the investigation into insider trading and into the role of some civil servants had not led to the suspension of the civil servants involved. In my experience, that would have been the normal procedure in a case of this kind. I should be grateful if the Minister would clarify what is happening about the Government's investigation of their own staff.
What should be done to overcome the problems which I have outlined and which have been exacerbated by the Government's policies? The Government began their monetarist experiment when they came to office in 1979. That experiment, and the Government's attitude to industry, have led to the present levels of unemployment and to the decline in manufacturing industry. The only way the Government can get us out of this mess is by expanding the economy and investing any surplus cash that the Chancellor of the Exchequer may have under the fiscal adjustment in the forthcoming Budget so as to ensure that the industrial base of the country is strengthened.
That does not mean providing help only for research and development and for design and high technology, which the Government are now doing but were not doing when they first came to office. It means investing more money in education and training. The Secretary of State for Employment will doubtless tell us how much he is spending now on the youth training scheme, but that scheme has been spatchcocked together without any predetermined plan so it does not dovetail into the comprehensive training system that this country so desperately needs.
We need to bring together the remaining industrial training boards, the work being done in further education and with apprenticeship schemes as well as the youth 789 training scheme so that they all fit into a comprehensive system to provide proper training opportunities and qualifications for young people. Young people in Germany and Japan are being provided with training opportunities and qualifications of that kind. We need investment not only in industry but in people. The Government should embark upon that investment in the forthcoming Budget rather than cutting taxes to help those already in work rather than the millions still out of work.
If we are to increase the output of manufacturing industry and the performance of the economy generally, the Government must do something about the uncompetitive nature of unit labour costs, which increased from 4.6 per cent. to 5.75 per cent. last year. They are not the lowest in Europe by any means and the forecast is that in 1987 they will increase by 5.25 per cent. If that happens, we shall lose out to our German, French and other competitors. That will simply make worse the looming balance of payments crisis due to what has happened to the price of oil.
There is only one way to reduce unit labour costs—by the Government having a clear incomes strategy and working with the Confederation of British Industry and the Trades Union Congress to ensure that pay settlements are brought down and are in line with productivity. For some years the Chancellor of the Exchequer has exhorted industry to bring pay settlements down to a reasonable level so that they are more in line with inflation and productivity, but he has invoked no policy to bring that about. Such a policy is absolutely essential if we are to get the expansion of the economy in the real world and not go into consumption in the way that the Government are presently engineering.
Present forecasts suggest that the Chancellor will make a fiscal adjustment of between £2.5 billion and £3 billion. It would be scandalous if he used that to generate more consumer expenditure in the economy, which will merely create jobs in Japan, in America and in France and other EEC countries rather than in Britain. It is scandalous that the Government have allowed pay increases to go way ahead of the levels of inflation and allowed consumer credit to increase beyond all imagination. They are now to compound that by giving further tax cuts which will further boost consumer spending and create jobs overseas but not in Britain.
We urge the Chancellor to adopt the approach that I have suggested so as to ensure a rapid decline in the levels of unemployment to which we have been subjected by the Government over the past seven years. For the people in the regions and in the north, it is urgent that the change in economic policy should take place. Without it there will be no hope of getting the unemployment figure below 3 million and keeping it there and manufacturing industry will continue in the decline that has been taking place throughout the Government's period of office to the detriment of the regions and of the country as a whole.
§ Mr. Edward Heath (Old Bexley and Sidcup)
I intervene to make, as briefly as I can, four practical points. The first is on the question of the north-south divide, with which I understood the debate to be largely concerned. My right hon. Friend the Chancellor of the Exchequer is right that for a long time there has been a north-south divide. What 790 is characteristic of these past few years is that the dividing line has moved further and further south. My right hon. Friend is also right that that is largely due to historical and geographical reasons—the placing of our industry and our ports and the changes in trade patterns that have occurred since.
Since 1945, in cyclical variations, Scotland, the north and Wales suffered first and came out of the cyclical arrangement last. With the development policies that were pursued by successive Governments, that was gradually changed. The first change came about in Wales, then later on in Scotland and the north-east.
In this decade the line has come south of Birmingham, and the midlands, for the first time, has found itself affected by a post-war cyclical change from which it has never suffered before. The consequence of that is that, whereas the midlands has often complained about action which was being taken in development policies for the rest of the country, now the midlands is asking that it should be treated equally at least with the other parts of the country which are benefiting from regional policy.
The point that I would like to make to my right hon. Friend the Chancellor is that the Government are investing more in those areas outside the south, but they are not getting the benefit of what they are doing publicly because they are still emphasising—as he did in his speech, and as the Prime Minister has done—that there are rich areas in the north. That implies, "Why are you making a fuss?" They then say, "Everything must be left to competition." Neither of those things is helpful with regard to the regions.
Some spots in Scotland, Wales and the north are richer than others, but they are limited compared with the south. The people who live in those areas know that perfectly well, and they know the appalling problems with which they are confronted from the point of view of jobs and certain other accessories of life. Therefore, as long as that attitude is adopted we cannot make the appeal to them that we ought to be making.
Then we have the claim that everything must be left to competition. It is quite plain that competition does not have an answer to these problems. There has been criticism of development policies—it used to come particularly from the midlands—that they had achieved nothing. That is a completely fallacious argument. The development policies achieved the changes that I have mentioned. When my right hon. Friend the Prime Minister says that it is wrong to treat those areas as if they were down and out, she is in part correct. The north-east has the finest infrastructure of any part of the country. Parts of Scotland have a magnificent infrastructure. When my right hon. Friend the Prime Minister says that there are high-tech areas in Scotland that are successful and profitable, she is right—but why? It is because we put the money into building Livingston and gave industry the inducements to go to Livingston. Therefore, Livingston has concentrated on high tech and it is successful. None of that would have happened had it been left to competition and the market.
§ Mr. Lawson
I know that my right hon. Friend is trying to make the most objective assessment that he can of regional policy in the past, but will he concede that the problem in the west midlands—it is the west midlands, not the east midlands; I represent an east midlands constituency and the east midlands is not a hard hit part of the country at all—arises in large measure because, 791 under past regional policies, business men wanted to place their investment in the west midlands but were prevented from doing so.
§ Mr. Heath
With great respect to my right hon. Friend, that is a repetition of the fallacy. West midlands business men wanted to expand at a time when the area was already understaffed from the point of view of working population and overcrowded from the point of view of plant. That was the plain fact. But they wanted to follow their own interests and they said that they wanted to expand and go out in the countryside. They said, "Don't worry about the environment; let us go there." We asked about the shortage of people, but they said that that did not matter because they would bribe them to go there, and that was part of the wage spiral. That is the fallacy that lies at the root of the argument that all must be left to the market and competition.
§ Mr. Heath
No, I am sorry, I shall not give way. I am going to be brief.
Looking at the successes, various parts of Scotland and the north-east have been very successful as a result of development policy. When my right hon. Friend the Chancellor says that his area is not greatly concerned about unemployment, all I can say is that the line has moved so far south that the most delectable area of Sidcup has unemployment of 9.5 per cent. I do not regard that as satisfactory or bearable; it is deplorable. That is the way in which the north-south line has moved.
My conclusion is that, as the Government are investing in the regions, there are parts in which they should invest more. If they have available money, rather than reducing taxes they should go for investment. Then they should have a constructive, co-ordinated development policy for the country as a whole.
Scotland has the best policy, because it is a combination of Government money and private enterprise money and that is due largely to my right hon. Friend the Secretary of State for Defence, because he brought that about while he was Secretary of State for Scotland. That is the attitude that the Government should be fostering.
With great respect to my right hon. Friend the Chancellor—I have never paid so much respect to him before—mergers and amalgamations are associated with regional problems. One of the overall problems from which we are suffering as a result of development since we reached the height of the industrial revolution in this country has been the movement of headquarters out of Merseyside or Newcastle-upon-Tyne down to London. When cyclical difficulties appeared, it was the places outside the headquarters that suffered. They were the bits that were closed down and where the jobs were lost. In the event of an amalgamation or merger by one of these hydra-headed concerns the chances are that the headquarters—in this case, on Merseyside—would have been closed, and later on, when things became difficult again, it would be that area that suffered. That is why there is a direct link between people's fears and amalgamations, mergers and absorptions, for which there is undoubtedly a mania at the moment. It is no concern to me whether that is the responsibility of the Labour Government in 1964 or 1970; it is past history. What does concern me is the present and the future.
§ Sir Peter Hordern (Horsham)
In this particular case I think that my right hon. Friend will agree that there is no reason at all to suppose that investment at St. Helens would have been reduced by BTR. One has only to look at the way in which it managed to turn round Dunlop and the extra investment in that company, the extra employment and the extra profits that that company has continued to produce.
§ Mr. Heath
I greatly respect my hon. Friend's experience, but not everybody would agree with his assessment of what happened to Dunlop. I was reading today an account in the financial press which says that Dunlop is but a pale shadow of what it was as one of our major tyre producers. I do not trust any such organisations, because their purpose is to gain the money which is in an existing firm.
That brings me to the second aspect of this, which is that it is the short-term view which is being taken, not the long-term view. People want to get their hands on a firm, above all, a family firm, which takes a long-term view and sets aside money for investment. They do not want it for further investment, but so that later on they can, if they get the opportunity, sell it off and use the money for profit dispersal. That is what they want and that is what they do. One has seen that in the United States to an extent to which it has damaged United States industry, and one sees the frailties of United States industry. I have great anxieties that the same thing is happening here, and there is every reason to be anxious about it.
I come now to the decision of my right hon. Friend the Secretary of State for Trade and Industry. I have the utmost sympathy for my right hon. Friend, and I understand his position. It was difficult for him. He is not in any way at fault because he is governed, apparently, at the moment, by the Tebbit guidelines of 1984. Those cannot take the place of the Fair Trading Act 1973 which insists on the public interest. The Tebbit guidelines say that competition is almost the only thing that matters. No Secretary of State has a right to change the law in that way. I suggest to my right hon. Friend the Secretary of State for Trade and Industry that his first task should be to change the guidelines to enable him to get back to the public interest.
Now we are told that we have competition because it is competition which considers the public interest. That is obviously not the case and never has been. That is not what competition is about. Nor is it the business of shareholders to decide the public interest on a merger. Shareholders are not in a position to decide the public interest. Can we blame a shareholder if he seizes a sum that he is being offered which it appears unlikely he will be offered again? There may well be a completely different attitude in a family business because the family will want to continue the business and will resist the short-term view and take the long-term view for the sons and grandsons. But that is not the case in a competitive firm such as we saw trying to take over Pilkington.
However, I must say that BTR has shown far more sensitivity, common sense and understanding of the political situation in Britain than General Motors did. If General Motors had done that, we would have been spared much of the agony and harassment which went on over that case. BTR should be given credit for having recognised the political climate on both sides of the House and for having acted accordingly.
793 Here I suggest that we immediately get back to the public interest. It can be referred and then come forward. But the Government of the day are the only body which can consider the public interest. It is the Government of the day who are responsible for doing that. The Government must not abdicate that responsibility by saying that they will leave it all to competition or to the market. I hope that, now that this incident has occurred and public opinion on Merseyside and in the House has made itself so clear, my right hon. Friend the Secretary of State for Trade and Industry will move back to the official terms of the Act and get away from the Tebbit guidelines. Then he will be able to make a judgment in the public interest as a whole, which is the Government's responsibility.
My third point relates to the City. Because of the internationalisation of monetary institutions and the position of the City, official regulation is inescapable. I do not believe that the City is any longer capable of self-regulation. It is not an interest to declare, but I was brought up in the City in merchant banking. At that time, it was possible for the City to regulate itself. There was no legislation on insider dealing because nobody imagined for a moment that there would be an orgy of insider dealing. [HON. MEMBERS: "Come on".] With great respect, I was there before my hon. Friends and I know the philosophy and ethic of the City at that time. The City did not reckon to involve itself in that. I see the faces of all my younger hon. Friends. That is not something that they can ever visualise, but I am sorry it happened.
If something was believed to be irregular or was likely to cause trouble, the Governor of the Bank of England just sent for the senior partner. When that happened we waited to see what the Governor had said. If he said, "I think that you are getting a bit low. You are under your 12 per cent.," one knew that that was the end of the matter and one had to get back quickly. If one did not, there was trouble. That is no longer possible today. Therefore, instead of trying to find a halfway house, we must face reality and recognise that there must be official regulation of the City.
The Securities and Exchange Commission has great powers. Under the Reagan Administration those powers have not been used because appointments to the SEC have been along the lines of President Reagan's own thoughts about capitalism and its operation. But now the SEC is coming back into its own. It is having to do so because of the present scandal. I think that my hon. Friend the Member for Tayside, North (Mr. Walker) takes the view that he brought the scandal to the Government's notice, whereas most of us thought that it was because the SEC dealt with it. However, I am prepared to give credit to both.
The SEC dealt with the matter in three or four months [HON. MEMBERS: "Four years".] With great respect, it dealt with it in three to four months. A slight financial penalty of $100 million was imposed and there was the knowledge that all the other scandals would be revealed.
The problem that we have always had to face—I hope that when my right hon. and learned Friend the Paymaster General replies he will deal with this—is, and I think that this is the truth of the inquiry being made at the moment, that the inquiry has no powers to enable it 794 to follow with a prosecution. Therefore, everything which is done must be duplicated by those who can then make the prosecution.
In my experience, which is some time ago when we had the Rolls Razor case and Mr. Bloom, we set up an inquiry immediately. That is all right, but it is not the real point. The real point is how quickly action will be taken on an inquiry. If one is trying to give the City a lesson on how it should behave, it is no use that happening many years hence. That lesson must be taken with prosecution in the immediate future. In the particular case that I am mentioning, the inquiry took two and a half years, and then, in order to have a criminal prosecution, there had to be a replica of the inquiry by those with powers to take evidence in a form which could then be used in a criminal prosecution.
The question is whether this inquiry has the power to bring about a criminal prosecution or whether it will wait and then refer the matter to the Director of Public Prosecutions who will then have to get the evidence for the criminal prosecution. That means that there will have to be a replica of the hearings which have been held. That is an important point. If the situation involves duplication, then as a practical point I suggest to my right hon. Friend the Chancellor that the new body that he is setting up to inquire into fraud should have that power and should start at the beginning and not duplicate something that is already being done. That is my third practical point.
My fourth point is that constantly we seem quite incapable of getting Government and both sides of industry to work together on a problem. For a long time I have found that the most disturbing aspect of our national life. One sees it constantly. We saw it in the case of Nimrod and we see it in the Government's use of new technology imported from other countries. We have heard about the increase in imports. What is it in our national character that prevents us from doing what the Germans, the Japanese and the Americans can do? As a result, Germany and Japan have a much more successful industrial base than we have.
Only the Government can give a lead and the people who can follow are the Confederation of British Industry, the Institute of Directors, the trade unions and finance. Finance ought to be the servant of national life, industry, agriculture and production. As we have seen in the last few months, more and more it is becoming the master of national life. Finance takes the short-term view and allows three months only. If the results after that time do not seem satisfactory, the management is changed and somebody takes over the firm. There is no interest whatever in the long-term point of view.
For those who are working the markets, it is not even a three-month view, it is three seconds, and if the answer is not up on the screen in front of them in three seconds they must do something about it. We cannot have a successful industry or a successful national life on the basis of a purely short-term view, yet that sort of view is becoming more and more common and the City is giving a lead. Those are my four practical points.
There must be an overall development policy and in the public interest the Government must take the ultimate responsibility for amalgamations and mergers. Competition is not in the ultimate public interest. In terms of the City, we have moved into an entirely new sphere of financial operations and financial life, in the same way as 795 New York and Tokyo have moved. We must face that and it is much better to take clear and firm action now than to have it dragged out of us later.
Lastly, we need much closer working co-operation between Government and industry if we are to move forward and recreate the industrial base which is so badly needed to provide the employment that our people need. I hope that the Government will advance that view and say that they want to see these problems worked out jointly. We need to help one another if we are to solve the problems that exist.
§ Miss Betty Boothroyd (West Bromwich, West)
We are debating crucial and fundamental issues about the quality of life for millions of families. My chief concern is with the west midlands and I emphasise that the problems plaguing that area are related not only to jobs and industry. They are also to do with public services, housing, and inadequate resources for health care and training. The problems are all-consuming and have come about because of long-term problems associated with old industrial areas. That was mentioned by the right hon. Member for Old Bexley and Sidcup (Mr. Heath).
The problems have been compounded because policies pursued by the Government have made every problem worse. In consequence, the entire economy of the west midlands region is collapsing upon itself. As one job is lost and as one firm and one industry has folded, each has sucked into that collapse other jobs, other firms and other industries which they previously sustained.
When she was Leader of the Opposition the Prime Minister visited Birmingham. She told the people of the west midlands at that time that unemployment was not inevitable. She insisted that job losses could be halted, that there was a cure for unemployment and that she had the medicine. That was in the election campaign of 1979. Since then whole industries have been destroyed and firms that were household names have gone out of existence. Yet there is a skill shortage, especially in engineering. A recent joint report by the CBI and MSC revealed that one in seven firms in the region has to restrict its production because it cannot recruit key workers. Some 71 per cent. of firms surveyed said that they had been short of engineers for over a year.
We are suffering from policies which have led to a reduction from 28,000 to 9,000 in the intake of apprentices into general engineering since 1979. That is a massive loss and I look forward to the Minister telling us how it can be made good. In the manufacturing sector alone more than 280,000 jobs have disappeared in the region and over 24,000 people in my borough of Sandwell have lost their livelihoods under this Administration.
§ Miss Boothroyd
I ought to make it clear that I do not intend to give way to any hon. Member. Too much time has already been taken up in this debate by interventions.
The Prime Minister's medicine is killing the patient.
Along with the dereliction of industry, we have also suffered an attack by the Government on public services such as transport, social services and housing—an attack on every essential of the life of the community. At a time when the demands on all those agencies is increasing 796 because of job loss and industrial decay, money and resources for renewal to sustain the social structure have not been forthcoming.
The National Economic Development Council has warned that the infrastructure in the older industrial areas has been allowed to deteriorate so badly that there is a critical need for repair and renewal. That report argued for major increases in expenditure on roads, sewers, housing, schools and hospitals. That is not news to the Opposition because we have been arguing that case for a long time. I should like to give a couple of examples from my area because nowhere are jobs and houses more crucially needed than in the west midlands.
We have 288,000 privately owned houses in need of urgent improvement. We have some 165,000 council houses with serious defects and 110,000 families on council waiting lists. Despite the fact that some 6,000 people are on the council waiting list for homes in my borough, the housing investment programme allocation for Sandwell has been massively reduced in the last seven years from £35 million to £12 million. Since the Prime Minister came to office, my borough has lost in real terms a massive £163 million in rate support grant. That loss is equivalent to £535 for every man, woman and child in the borough.
A letter from the Builders Merchants Federation expresses concern over the condition of the nation's housing stock. Perhaps other hon. Members have received the same letter. The federation says:We feel it important to remind the Government of the difference between spending money for the sake of A and spending on investment".The letter goes on to say that around £2 billion a year is needed for refurbishment and renewal and that a long-term political and financial commitment to construction would have a minimal effect on imports and a beneficial effect on unemployment. Such a commitment would undoubtedly benefit the west midlands but it does not seem to be forthcoming.
If we turn to the water industry in that region and the infrastructure there, the Severn-Trent water authority has 22,000 miles of sewer tunnels, all of them over 60 years old and much of it over 100 years old. The authority estimates that it will cost something like £10 million annually over 10 years to cope with urgent work to repair that infrastructure. This represents huge assets which are essential to support the industrial and social structure of that area. The number of complaints to the water authority about dirty water is evidence of the need to refurbish the water mains at an estimated cost of around £40 million. Yet the work is just not getting done because we are allowed to spend only half the money that we had 10 years ago for this type of renewal.
Anybody with common sense knows that the longer we delay tackling these jobs, the more it will cost disproportionately in financial and human terms. It does not seem to me that this Government understand about putting jobs and people together. That very revealing document submitted to the European Commission by the Government clearly showed that there are no plans to make any reduction in unemployment between now and 1990. For the west midlands the Government predict an increase in the working population and a fall in the number of jobs available. The document says:Continuing restraints on public expenditure…curtail the resources which central, local and public sector authorities have available to undertake development programmes or lake797advantage of significant infrastructure development opportunities. This in turn limits employment arising from construction programmes and major capital projects".What an appalling admission that is. The Government know that the most effective way of getting people back to work is through public works programmes but the people of the west midlands can expect no such commitment from the Tory party.
Midlanders are decent people. They are men and women with families who seek the same comforts and opportunities as all of us. They want to work, but when a job vacancy occurs 50 people chase after it. That is the reality of the great divide.
Of course the west midlands, like the rest of our devastated regions, has pockets of prosperity. The Minister, winding up, will no doubt refer to them. I tell him simply—if anything grows in the west midlands it grows not because of this Government, but despite them. In the west midlands, as throughout the country, there are pockets where business, organisations, communities and people work to make things grow through the dustbowl of Thatcherism. Soon they will have a Labour Government working with them instead of a Government working against them.
In 1945 Clement Attlee described the mission of the Labour party asproving that socialism and common sense coincide more than our critics understand".That definition has an irresistible appeal today.
We know that it is common sense to put homes into good repair and not wait until they collapse. The Prime Minister prides herself on being a prudent housewife. No prudent housewife keeps her money under the bed when the roof is leaking. We know it is common sense to invest Britain's money in British manufacturing. The Prime Minister believes it more sensible to invest overseas to help foreign manufacturers compete against us. We know it is common sense to train a highly skilled labour force to compete with our overseas competitors. The Prime Minister believes it sensible to run down apprenticeships and starve industry of skilled labour.
We know it is common sense to make sure that mergers and takeovers are judged against the nation's interests. The Prime Minister seeks to let vital firms be tossed about like chips in a casino. We know it is common sense to provide health care for our people, to act against the causes of ill-health and disease. The Prime Minister thinks it more prudent not to meet urgent need and to keep people waiting for treatment. We know that it is common sense to use money to put people back to work. The Prime Minister believes it more sensible to borrow money to keep people out of work.
In every area of our national life policies of common sense can be applied. They are policies which work and will unite our country. They will heal the nation's wounds and bring the family of Britain together again.
§ Mr. Michael Heseltine (Henley)
As I listened to the Chancellor describing the achievements of this Government in gaining control over the economy, the one overwhelming thought that occurred to me was that it would have been very surprising if the record of a Tory Administration did not greatly exceed that of the preceding Labour Government. The debate in a sense, 798 from their point of view, has an artificial ring about it because we are not dealing with problems that have emerged under this Government; we are not dealing with a change in the emphasis of our society or in our attitudes towards our industries that have suddenly sprung up. The problems we are dealing with—major shifts between one sector of the economy and another and one part of our country and another—are deep-seated and long-term.
I have no doubt whatsoever that my right hon. Friend the Chancellor of the Exchequer and his predecessor, the present Foreign Secretary, are owed an immense debt by the party to which they belong and by the country for the fact that they have fought valiantly to bring about a reduction in inflation, a recreation of incentives, and to inject into British industry a quality of productivity that has long since escaped us.
That is not the issue of the debate. The issue of this debate is what are we going to do with the growth which the Government have achieved and how is it to be spread through one region of this country as opposed to another. As the issues become more acute, as the problems which will face our economy increase, as gradually the benefits of North sea oil diminish, as gradually the ability of the Government to realise assets reduces, and as the trade balance becomes more acute, then these issues and the balance within society will become that much more acute.
The shorthand of the "north-south divide" in a sense glosses over the realities of the situation. If one looks at the very large parts of the north of this country, one sees areas of extreme environmental attractiveness and companies which are winning in the world arena. It is by no means irrelevant to this debate that one of the background judgments which the country has had to exercise is whether a quite excellent company called Pilkington should be merged with a midland-based company. The fact is that both of them are situated in the midlands or the north. Nobody denies that both BTR and Pilkington, each in its own way, are excellent. So to suggest that there is no excellence in the north or the midlands, when two of the companies at the heart of our debate are both excellent, is grossly to miss the point.
There is a substantial area of quality, both environmental and industrial, in the midlands and the north. If one wants to see the most significant area of urban reclamation it is not to be seen in the east end of London but in the east end of Glasgow. Glasgow is rebuilding itself on a mixture of public enthusiasm and the ingenuity of a capitalist system in a way that 10 years ago would have seemed inconceivable to those who knew Glasgow well.
§ Mr. Heseltine
I said public enthusiasm. Let me in no way try to run from the fact that a Labour-controlled local authority has had the vision to see the opportunities of partnership with capitalism,. Before the right hon. and learned Gentleman makes capital out of that, let him consider the alternatives. What has been done by Labour local authorities, which reject capitalism as though it was a plague? The very point that the right hon. and learned Gentleman makes is the essence of the case. If only the Labour party in its totality of the north would recognise the need to embrace capitalism, we would not have the problems there that we have today.
§ Mr. Heseltine
The right hon. and learned Gentleman will have the last word when he replies to the debate.
§ Mr. Smith
Yes, I do insist. The right hon. Gentleman knows perfectly well, if he has studied the GEAR project, that by far the greatest amount of expenditure has come from the public sector. It can far better be described as a public venture than some form of capitalism. Will he also take the opportunity to criticise a Government who prevent so many local authorities from taking initiatives like that in their areas?
§ Mr. Heseltine
As the Minister at the time responsible for imposing upon east end of London boroughs the need to recognise capitalism, I shall take no lesson from the right hon. and learned Gentleman in how to co-operate with Labour authorities. Let me say it if the right hon. and learned Member wants it; if Labour in local government would recognise the constitutional position of local government and co-operate with central Government, who have a superior mandate, we would have a far healthier climate in the regions.
On the other side of the equation which points to the dilemmas of the north has to be weighed the equal dilemmas to be seen in the most acute areas of poverty close to central London and, of course, the long-seated structural disability to be found in the far south-west. So we are talking not about a north-south divide but about a balance where relative prosperity in many parts of the south and south-eastern areas is to be starkly contrasted with increasingly relatively under-privileged areas, particularly in the urban and more remote parts of the country.
The explanations for these things are complex. There have been without doubt long-term changes to which many right hon. and hon. Members have referred. It is obvious that if there is a broad concentration of manufacturing industry in the older towns and cities, a shift to service industry will upset the patterns of employment and prosperity. Equally, if the transport revolution, the house and property-owning democracy revolution and the destruction of the grammar schools all impose upon urban areas a lack of choice and a lack of quality, then those who have the strength to move will move. They will move to the suburbs and many of them will move to the south. If, over 30 or 40 years, there is a climate in which the tax system is orientated towards the destruction of family businesses and to the enhancement of institutional wealth, it is no surprise that increasing proportions of the power of the country become centralised in the City of London.
So great market forces and great changes, many of them beyond the control of the country, there have been, but the problem is that Governments of all parties have reinforced those market forces to a scale that I believe has been little perceived. I want to give just three examples. Mortgage tax relief has fuelled, rightly, the property-owning democracy. But a consequence of the incentives to the property-owning democracy has been to give to the insurance companies, which cover the mortgages encouraged by the incentives, a vast flow of the savings of 800 the nation. Those savings were invested broadly from a southern-orientated position. That is a £5 billion subsidy within the gift of the Chancellor of the Exchequer.
Pension funds pay no tax on their income. The revenue forgone by the nation is £3.5 billion a year. The consequence is to take the savings of the companies that generate the wealth out of those companies and to institutionalise them remotely at a cost of £3.5 billion a year.
If someone has a small or a medium-sized family business there is hanging over him, and has been for most of the half century, the knowledge that it is a one-generation business. He cannot pass it on. If he wants to sell it locally, the local community will almost certainly pay cash as opposed to the tax deferred shares which he can get from the publicly owned companies. The publicly owned companies are again subjected to the disciplines of the institutional wealth of the City of London. My right hon. Friend has made a significant shift in the prospects for family owned businesses. I admire and praise that, but he has not gone all the way to remove the disincentives to the local transfer of power. He still permits the concentration of power which comes when a family business has to judge whether to take cash, most likely local, or to take shares with tax deferral.
All those incentives add up to almost £10,000 million a year, driving the market as opposed simply to reacting to the market. Over a period of decades under all Governments, that has been the centralising process that has led to the point where people criticise the accumulation of wealth in the City of London.
Against that annual incentive there is a total regional policy of £600 million, most of which is concentrated at the extremes of the regions. Basically, there is perhaps under £200 million of what could effectively be called regional policy in England as opposed to the best part of £10 billion which is drawing the forces south. Those are the issues underlying the north-south divide.
All other capitalist economies with which we have to compete have similar problems—the drift to the south, the institutionalisation, the scale of modern money markets. But all of them in some way, though different in every way, have dispersed power and perpetuated the dispersal of power within their political system. The Americans and the Germans have federal systems of powerful elected governors, state banks and major corporations based in local economies. Those are all there to fight the corner of the particular area.
In Germany, as everyone knows, they have far less institutional wealth. The banks stay much closer to the companies. The lander have a basis of strength for the local politicians who lead them and who are national figures in their own right. The two-tier boards make it difficult for any multinational or remote company to exert an overbearing influence.
In France, as everyone knows, there is a much closer relationship between the provinces and central Government simply because many Cabinet Ministers are mayors of the local communities that they represent.
In Japan there is the central thrust of the MITI organisation, co-ordinating the strength of the ruthlessly efficient capitalist economy.
So there is in all other capitalist economies much the same problem but also an identification of it and a determination to try to counter and balance it. What do we in this country face by way of alternatives? There are 801 things that the Government can and should do, and which a Tory Government ought to do because only a Tory Government effectively recognise the need and could do them.
We should recognise the strength of the Secretaries of State for Northern Ireland, for Wales and for Scotland, who have a regional responsibility as opposed to a narrow functional responsibility. There is a relatively simple way of doing that. Instead of each Minister who has a responsibility for a functional part of Government representing only that aspect of Government, there would be little difficulty in associating each of those Ministers with a different part of the country, so that instead of having to go to an area to explain whether the transport, local government, housing or Home Office policies were right or wrong, the Minister would have to explain the totality of Government policy and would, therefore, be more aware of it.
Civil servants should be moved across the framework of Whitehall because at present they are orientated towards their departmental ethos. They are employed to brief Ministers to win for that Department, rather than to extend a Government policy more coherently.
I believe that it is necessary to neutralise those incentives that are having a significant effect in moving the forces of wealth creation to a central and remote control. In almost every policy, the Government's thrust, and the success of their thrust, is to push power further from the centre, for example, the sale of council houses and the start of the small industrial start-up schemes with all the incentives that they involve. When the education system has problems, we talk about giving teachers, head teachers and parents much more influence in the schools. However, we are still encouraging, with vast subsidies, the concentration of the major influences on wealth creation in the City of London. The incentives that are doing that should, at least, be neutralised.
I have no doubt that we must recognise the CBI's demands for an industrial strategy. Competition is of fundamental importance if one is to survive in a capitalist world. However, the nations with which we must compete do not rely wholly on a policy of competition. They are much more interested in balancing the excellence of competition with the strength of a coherent national endeavour to win.
One of the problems that we have inherited is the overbearing attitude of the Treasury, which dominates the climate of decision making. The public expenditure round sets the tone for policy-making in Whitehall and all else flows from that. That is not compatible with an industrial climate in which companies are trying to take long-term decisions about complex markets and investment for perhaps 10 years, as opposed to a relatively short period.
Therefore, it is necessary that a far more powerful Department of Trade and Industry should balance and counter the influence of the Treasury. The Pilkington case, which happily has now been resolved, would not have happened if this country had a clear understanding of the requirements of a long-term industrial strategy. The best solution would be for the institutional owners of wealth to organise themselves so that they could have a dialogue with the management of their companies and so that the managers who were committing themselves to long-term programmes knew that they had a certain degree of 802 security from their owners. If managers do not get that security, they will invest for the short term, maximise the cash content of their companies and take attitudes towards training, research and development which will minimise their contributions in those areas. No other capitalist economy with which we compete behaves in that way. One way or another, all those economies are mobilising the resources of Government to back their capitalist systems and to give a degree of confidence to their managers to make them feel better able to make long-term investments.
The Government's record of innovation in city reclamation and the rebuilding of our cities is unlike that of any other Government in recent times. We have proved that we know how to bring back life to the city centres. It has been done most conspicuously in the east end of Glasgow, but the Government have also pioneered various inner-city initiatives in the east end of London. The money that we are putting into that is trivial in the context of the needs and priorities of those areas which are relatively less prosperous.
There is no case for Scotland and Wales to have Scottish and Welsh development authorities when there is not exactly the same determination and co-ordination in England. It should be a first priority for the Government to establish an English development agency to co-ordinate the administration of the urban policies of the Department of the Environment, and to do so in a climate that fuses together the strength of the public and the private sectors. The instrument of that agency should be an urban development corporation for large-scale activity. Where the quality of local government is inimical to partnership with the capitalist system a range of other instruments have been pioneered, for example, the private sector trusts, such as those in Thamesmead or Stockbridge which deal with smaller areas of activity. However, the Government have proved that it can be done and I can see no reason why we should not build on that on a huge scale.
It is of paramount importance that that should be done by this Government because anybody who has looked at the alternative policies confronting the country will realise that those policies can bring about only a deterioration, not an improvement. When one listens to Opposition Members talking about a climate in which they will tax until the pips squeak, they are really talking about the destruction of individual entrepreneurial activity and the break-up of family businesses—the very things that they now come here to discuss and to which they would return, if they were returned to power.
When Opposition Members discuss repealing the Employment Acts introduced by the Government, they are talking about returning to the trade unions—that unique combination of anarchy and restrictive practices—precisely the power to undermine the country which they used so successfully for so long. Hon. Members talk about more power for local government, but anyone who has perceived what local government in the hands of the Labour party has done to alienate anyone who has the choice to leave our cities will realise what the future offers. All this pushes on to the Conservative party an added responsibility not to innovate in a way that we have refused to do, or to go back on anything that we have previously said, but simply to do on a bigger scale and with greater conviction the things that we have already proved work.
§ Mr. Robert Parry (Liverpool, Riverside)
Mr. Deputy Speaker, I am glad to have caught your eye in this important debate on the Government's economic policy and its effect on the regions and on the division of wealth between the north and the south. Bearing in mind Mr. Speaker's request, I shall do my best to be brief so that my hon. Friends, particularly those from the north, can participate and make their contributions.
I support the general thrust of the Opposition motion and the arguments put forward by my right hon. and hon. Friends on the Front Bench in their attack about our divided nation. That divide has been caused by the Government's deliberate policies since 1979.
I shall speak mainly on the effects on the city of Liverpool. The widening gap between north and south is made clear by irrefutable statistics which show the poverty and deprivation that are causing increasing difficulties in the inner urban areas of our major cities and regions. The city planning officer of the city of Liverpool has recently reported on the budget options to be considered by the city council which faces a £40 million shortfall. I am grateful to Mr. Hayes for the information that he has provided. Since 1979 more than 100,000 jobs have disappeared on Merseyside. That figure represents the population of a small town.
Liverpool has felt the brunt of the job losses. Between 1979 and 1984 Liverpool lost 65,000 jobs, which is a decline of 22 per cent., and that is still increasing. About 40 per cent. of those jobs were in the manufacturing industries, where employment is down by 46 per cent. About 19 per cent. of all blue collar service jobs have been lost as a result of major closures by multi-national companies in Liverpool, for example, the sugar company Tate and Lyle, the brewing company of Whitbread, the tobacco industry at British American Tobacco, and the confectionery industries of United Biscuits and Lyons Maid, and the sweets and chocolate firms of Barker and Dobson and Tavener Rutledge. The Government would not intervene to save one of the thousands of jobs that were lost.
The public sector has become increasingly important in the local economy. Despite a reduction in public jobs between 1978 and 1984, those jobs increased as a proportion of all jobs from 31 per cent. to 35 per cent. The city council is the largest employer in the city with 32,000 employees. or 14 per cent. of all jobs in 1984.
In spite of the importance of the public sector and the city council in maintaining jobs, and the battle between the council and the Government to provide jobs and services, the councillors are now facing disqualification and bankruptcy and they are appealing to the House of Lords next week. I hope that they will get more sympathy and justice in the other place than they have received from the Government in this House.
My constituency has the highest level of unemployment on the British mainland—more than 35 per cent. right across the board. In some areas the figure is 55 per cent. to 60 per cent. Those figures are morally indefensible. Long-term unemployment is a curse and we need positive Government action to put it right.
It is a fact that urban decline is more severe in Liverpool than in any other British or European city. Population decline with the loss of rate support grant is another major factor in the economic decline of our cities. In common 804 with other cities, Liverpool continued to lose population heavily between the 1970s and 1981. Since 1981 the rate of loss has fallen from 9,000 a year to 6,500 a year, but that rate remains significantly higher than that in other conurbation core cities.
The selective loss of younger more skilled workers is continuing. Many youngsters who are in despair of ever finding a job have taken the advice of the chairman of the Tory party, got on their bikes and left their families to find work and regain their pride. With the loss of traditional jobs in port cities, such as in shipbuilding, ship repairs and heavy engineering, skilled and semi-skilled workers have left, leaving an ageing unskilled labour force looking for the few jobs that remain to be found.
The number of households has not declined, so an increasing number of one person and pensioner households have been left. The social characteristics of the population must also be considered. The proportion of the employed population in Liverpool decreased from 42 per cent. to 34 per cent. between the 1970s and 1985, leading to a more dependent population on those fortunate enough still to have work. The unemployed, the sick and pensioners accounted for 33 per cent. of the population in 1985, compared with 19.3 per cent. in the 1970s.
The EEC survey puts Riverside as having the highest unemployment in Europe. Given that low incomes are the main cause of deprivation, several groups are at risk, including the unemployed. More than 30 per cent. of the male unemployed and 25 per cent. of the total work force are on the scrap heap. The highest rates of unemployment are among the young with a rate of 44.5 per cent. for 16 to 19-year-olds. That is an appalling waste of our youth resources.
I shall now turn to those dependent on state benefits. In 1985, 76,000 people in Liverpool received supplementary benefit and 94,850 received housing benefit. Both figures have increased since then. Particularly vulnerable groups, such as the over 75s and the sick and disabled, are increasing. It is estimated that a third of all full-time and three quarters of all part-time workers on Merseyside earn low wages. That is why my trade union, the Transport and General Workers' Union, has campaigned for a minimum living wage.
The position of children in low income households is illustrated by the fact that more than 50 per cent. of all school children now receive free school meals. That is a disgraceful figure and I hope that the Secretary of State will take note of it. The lowest income households are concentrated in inner-city areas and the highest income households in the owner-occupied, plush areas of south Liverpool. People living in inner-city areas have low levels of skills and car ownership and the areas receive a high education award. But there is a high level of unemployment, with children receiving free school meals and sickness. Following bus deregulation the poor have greater trouble in visiting relatives and hospitals than previously.
I shall deal briefly with the Newcastle upon Tyne social audit which was carried out in 1985. Newcastle has many problems similar to those of Liverpool. The audit examined the impact of Government policies on the city's residents within the national context of unemployment increasing two and a half times, a 10 per cent. overspending in public expenditure, half of which was due 805 to increased social security benefits, and increases in essentials, such as fuel and rent by twice the level of inflation.
It was estimated that in Newcastle Government policies between 1979 and 1984 led to a reduction of £70 million in disposable income—that is, £700 for every household. That figure can be multiplied to show the total reduction for all our major cities. The audit concluded that the quality of life declined significantly and it examined two particular factors—the reduction in the provision of public services and the quality of public sector housing.
Liverpool city councillors have been trying to improve our housing stock by the demolition of pre-war slums and rat-infested multi-storey blocks of flats and by replacing them with new houses with gardens back and front. They are being crucified for doing so.
Finally, the audit identified the impact of unemployment. That was particularly marked in certain areas and groups, such as young people. The audit concluded that unemployment had serious effects on health, family life and crime. In Liverpool I know of the breakdown of marriages, of people having physical and mental breakdowns and of the increase in hard drug taking and petty crime, particularly among long-term, unemployed youth. One of the gravest problems of inner-city areas is the horrendous level of unemployment among young black people, but the Government continue to ignore that.
When the Paymaster General replies, I hope that he will not play us the same old record of how much the Government have already given in grants to the regions. I hope that he will address himself to the effect of long-term unemployment, deprivation and poverty in our regions and cities which is an affront to the pride and dignity of the poorest in our society. Since 1979, the Government have never made unemployment a serious issue. Can we hope for a change of direction? The right hon. Member for Chingford (Mr. Tebbit) is alleged to have stated that nobody with a conscience could vote Tory. Given the Government's disastrous record and their attitude to the poor, for once I am completely in agreement with him.
§ Sir William Clark (Croydon, South)
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) seemed full of bluster but short on policy when he opened the debate. I would have thought that it would have been better if the Labour party had not selected the economy for debate. Labour Members postponed it last week, probably because they had cold feet as my right hon. Friend the Chancellor of the Exchequer suggested. I suppose that they attack the economy in order to play down their lack of a defence policy.
The Opposition have a cool cheek to attack the economy, considering their record. It is irresponsible for any Opposition Front Bench spokesman to talk down the British economy. I shall return to the gloom and doom of a balance of payments crisis around the corner, of which the right hon. Gentleman spoke. Their remedy is to tax initiative—we saw them do that when they were in office—and to borrow more. I remind Opposition Members that it is easy to borrow and spend, but difficult to repay. Considering that it costs between £17 billion and 806 £18 billion to pay the interest on the national debt, it would be gross folly to increase it by any more than it is being increased at present.
Another plank of Labour policy is centralisation. Labour Members want to centralise control in local authorities and to tell local authorities to employ more people. They do not tell us what productivity figure we shall achieve from that. Any Government can cure unemployment by employing people in non-jobs and that is no doubt precisely what local authorities will do under a Labour Government. As my right hon. Friend the Member for Henley (Mr. Heseltine) said, that will return more authority to the trade union movement—we all saw what happened there—and centralise power in Whitehall. We have been through all that before and seen the folly of it, yet the Labour party tells us the same old story.
We have heard a great deal about the divided nation. We should bear in mind that the trade union movement has a certain responsibility for some of our industries in the north. I remind hon. Members—they will probably remember—of the month-long strike in the shipbuilding industry caused by a demarcation dispute whether a wood or metal worker should put a rivet through a piece of metal and wood. It is small wonder that we lost orders.
§ Sir William Clark
No, I will not give way. We do not have much time and I have promised to be brief.
§ Sir William Clark
The demarcation disputes caused us to lose orders. Indeed, it is small wonder that we lost orders. How could we possibly retain our competitive position if we were arguing over such stupid frivolities?
The right hon. Member for Sparkbrook made much play about manufacturing industries. I am sure that the hon. Member for Liverpool, Walton, (Mr. Heffer) will have considered the figures with avid interest. If we consider the record on visible trade—not invisibles—which includes manufacturing, for the last four years of the previous Labour Government, we discover that there was an overall deficit on the balance of payments of almost £4,000 million compared with what has happened since 1979.
Since 1979, visible trade has shown a deficit for four years and a surplus for three, with an overall deficit of almost £4 billion. However, if we take invisibles into account, the overall surplus is about £20 billion to £21 billion. Consequently, to some extent, when the right hon. Member for Sparkbrook says that there will be a crisis in balance of payments this year he is correct. There will be a deficit of about £1 billion to £1.5 billion. However, that is no reason to claim that the economy is bust and that it is all gloom and doom.
Consumer credit has been criticised. What would the Opposition do with consumer credit? The Government are not spending the money; the public are. Do the Opposition mean that the public must not spend money? Should we increase interest rates? If the hon. Member for Stockton, South (Mr. Wrigglesworth) wants to criticise consumer spending, he should consider the bad debt record on the so-called plastic money. That record is extremely low—
807 about 1 per cent. If the hon. Gentleman compares that with the debt in America, he will see that our spending nowhere approaches that in America.
Perhaps we will hear later how the Opposition would control consumer spending. Would they increase interest rates? Or would they tell the banks not to lend money and stop people spending their own money?
Great play has been made of taxes. I believe the late Iain Macleod once said that Labour increases taxes and the Conservatives reduce taxes. That is as true today as it was then. As my right hon. Friend the Chancellor of the Exchequer reminded us, the Government have reduced the standard rate of tax from 33p in the pound to 29p. There may be a further reduction on 17 March—who knows? The Government's record with regard to the lower paid is very good. The starting rate of tax threshold has been increased by about 22 per cent. in real terms.
If my right hon. Friend the Chancellor has any adjustment or alleviation of tax in view, I hope that he will concentrate on thresholds in preference to the standard rate. We must remember that a married man starts to pay tax at the standard rate when he earns £70 a week and a single person after he has earned £45 a week. When we consider that the national average wage is about £190 a week, the priority should be on thresholds. If my right hon. Friend can accommodate both, all well and good, but I am convinced that he should concentrate on thresholds.
The Opposition have referred to reductions in taxation and claim that the money should be spent on investment. Opposition Members must remember that some £25 billion is allocated for capital expenditure this year. Therefore, it is wrong of the Opposition to give the impression that the Government are not spending money on capital investment. It is also wrong for the Opposition to claim that the Government are trying to bribe the electorate because this is an election year. If that is the case, we have been bribing the electorate since 1979, as we have reduced taxes in successive Budgets since then.
§ Sir William Clark
I will not give way. However, I believe that I know what the hon. Gentleman wants to ask. The threshold has been increased 22 per cent. above inflation each year that we have reduced taxation.
The Labour party is threatening the taxpayer with increased taxation. If my right hon. Friend the Chancellor reduces the standard rate of tax by 2p or increases thresholds by 10 per cent. or whatever, will a Labour Government—if by mischance a Labour Government were elected—make a cancellation or reduction retrospective? The taxpayer is entitled to know the answer to that.
We have also heard an accusation about oil. When I tackled the right hon. Member for Sparkbrook about the difference in the balance of payments deficits that existed when the previous Labour Government were in power and that under this Conservative Government, he claimed that the difference was due to oil. However, he did not say that the total revenue that this Government have had from oil over the past six or seven years is about £60 billion. Our overseas assets have increased from £20 billion in 1979, to £95 billion today. That will obviously help our invisibles and our export potential.
As my right hon. Friend the Chancellor reminded the House, 1 million new jobs have been created since 1983. 808 I know that that good news does not please the Labour Opposition and they always try to play that fact down, but having weathered a recession, that should be welcomed on both sides of the House.
The Labour party plans to let local authorities have more say in employment. The recent National Audit Commission report about local government expenditure was very interesting. The voter need only consider Brent and Haringey to discover what the Labour party will do if it comes to office.
It is impertinent of the Opposition to criticise the economic performance of this Government. Since 1979, we have come through a recession that was much deeper than most people had thought. Output and exports are up. Investments are up. Unemployment is on the way down. Our borrowing is down and that is extremely important. Taxes and inflation are down and the standard of living for every man, woman and child is higher today than it has ever been. In addition, we must remember that the Government have repaid half of the debt that the Labour Government incurred from the IMF.
The Conservative Government have created not only 62 per cent. owner-occupation but, following on from the point made by my right hon. Friend the Member for Henley (Mr. Heseltine) about institutions, they have reversed the trend in the increase of wider share ownership. When the Government came to power, it was thought that there were about 3 million small shareholders. Today, with British Gas and British Telecom, there are more than 7 million small shareholders. That gives the shareholder, the voter, the ordinary man in the street, far more independence. I believe that it is much better to give the citizen more independence by allowing him to buy his council house and to encourage him to buy shares. I am convinced that that can only be achieved under a Conservative Government. It would be a disaster for the small man if there were ever to be a Chancellor of the Exchequer in a Labour Government.
§ 8.8 pm
§ Mr. Jim Craigen (Glasgow, Maryhill)
The Treasury Bench must always find comfort in the contributions from the hon. Member for Croydon, South (Sir W. Clark). If the north-south divide is the subject of today's debate, the Chancellor of the Exchequer certainly gave it a by-pass operation in his remarks.
Economic policy is now geared more to the election than to the longer term considerations of the country's economy. Frankly, I wonder what the past eight years of economic and fiscal policy have been about. The Chancellor can chide my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) as much as he likes, but the Chancellor's November statement gave relaxation to the brakes that he was so insistent should be placed on public expenditure.
I listened to the right hon. Member for Henley (Mr. Heseltine) talk about regional policy. It was interesting that he mentioned the success of the Glasgow Eastern Area Renewal Project. The Government have pulled the plug on that project, as my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall) angrily had to point out when the decision was made to end it.
There is no doubt that the points made earlier by the right hon. Member for Old Bexley and Sidcup (Mr. Heath) reflected the difficulties that have operated over the post-war years in respect of regional policy. However, the tide 809 is now running out for the north of Britain in the operation of regional policy. So many of the in-built advantages of post-war regional policy have been eroded or dismantled. Apart from the pushes that the Macmillan and Heath Administrations gave, the great impetus for regional policy since the war has always come from a Labour Government.
I was interested to hear the right hon. Member for Henley extol the virtues of the Scottish Development Agency. It was the previous Labour Government who introduced that agency and the Welsh Development Agency. The Scottish economic picture would be infinitely worse had it not been for the contribution that the agency has made, in spite of the fact that there has been a curtailment in its resources and on the impetus that it has been able to bring.
I have never ceased to be surprised by the number of businessmen who come to me as a constituency Member looking for support from public funds. I take the simplistic view that if it means jobs for my area then I am for it. I do not think that many building firms would willingly ignore the possibility of public contracts any more than a civil engineering company would not want to bid for any public project. Retailers will say that they want to see more people in employment so that there is greater purchasing power which will assist the economy and business.
If we are talking about the drift that has taken place from the north to the south, the sooner the Government get their act together the better. The real need is for the removal vans to be busier in the London area and for more Government offices to be dispersed to other parts of the United Kingdom so that the people involved in the decision-making will be working in different parts of the country. The United Kingdom seems to have a far greater percentage of corporate headquarters located in its capital than almost any other country. Therefore, there is a need to persuade many of the companies that they should be located in Manchester, Newcastle, Birmingham, Glasgow, Edinburgh, Dundee, Aberdeen or Cardiff. There is no reason for the concentration in the metropolis. That would have a beneficial effect. It would force an increase in the standard of living in many of those parts of the country. If some of the top civil servants and company directors were living and working in those areas they would make sure that the housing, environment, schools, shopping facilities and the arts were all much better and much richer.
It used to be said that the Tories represented industry and commerce. Nowadays I think that they are far more influenced by the financiers who are concerned only with getting rich quick and flattered by some Right-wing academics who have never done a hand's turn on the shop floor but can write a book about how British industry should be operated.
There is no point quoting unemployment figures, because the only quotations that the Treasury Ministers are concerned with are those from the stock exchange. It might have more effect if I were to quote such figures. In any case, we have had some 19 changes in the method by which the unemployment is calculated so that nobody really needs take it as seriously as they once did. However, the proportion of people in the hopeless position of being long-term unemployed is the most significant and worrying aspect of the unemployment problem.
810 We have heard today about the withdrawal of the BTR bid for Pilkingtons. Last week we seemed to be facing a worrying situation with the Barr and Stroud company in Glasgow which employs over 2,500 people. There was a concentration of research and development that would have easily been dispersed in favour of short-term profit. Eating the seed corn of tomorrow's investment for today's profit is seen in many other parts of the United Kingdom. A blood bath has taken place in Scotland in terms of Bell's Whisky and Distillers, and Guinness has not come up to Scotland to locate its headquarters as promised. I speculate that perhaps the next merger will be Argyll and Guinness in order to avoid hefty legal suits.
The Chancellor talked about Edinburgh as an important financial centre, second only to London. It is a small second fiddle when it comes to some of the key decisions that have to be taken. Some of the people who are doing best in our society at present are advertisers, stockbrokers and company lawyers. They are all doing well out of the boom in mergers. We should not kid ourselves that it is all about improving competition and increasing the flow of benefits for the consumer because some of us are long enough in the tooth to know that it is nothing of the kind.
This new year Scotland has had a cruel Ne'er-day. There was the announcement about Caterpillar. We know that United States investment has been a sizeable segment of investment in manufacturing jobs in post-war Scotland. It is all too easy to write off the significance of manufacturing and to overplay the importance of the service sector. They are both important and the sooner we recognise the interplay of the two the better. Any advanced economy needs a good and strong manufacturing sector as well as a buoyant service sector.
The only growth industry we seem to have at Westminster is nostalgia. Even the Prime Minister keeps referring to the previous Labour Government. That was eight years ago. There are millions of young people who will vote for the first time in the next election. There are many young people who voted in the previous election but who did not remember too much about a Labour Government. I just make the political point that we are living too much in terms of past considerations. [Interruption.] I digress, but if I were to take a walk down memory lane I could be every hit as selective as the Prime Minister.
In my area, unemployment has doubled and almost trebled. Many old age pensioners find that, in real terms, their pensions are worth less. Prospects for young people are infinitely more depressing in terms of real jobs, as the Prime Minister would say. Youth training schemes have not had the long-term success that some employment Ministers seem to have envisaged. Many training professionals realise that, in many ways, when one tries to generalise training, one loses out on the specific skills—high skills. Already there are signs of skill shortages. There is little evidence that the Government are doing a great deal to combat these shortages.
Benjamin Disraeli might be amused at the frequency with which his words, "Two nations", have entered the currency of today's language. Of course, he was talking about rich and poor rather than about north and south. The singular point that he made was that one set of people did not understand, far less comprehend, the values of the other set of people. It was evident, listening to the right hon. Gentleman, that the Chancellor, whatever he 811 comprehends south of Blaby, certainly does not know much about what is going on in the northern parts or even the western parts of the kingdom.
The problem facing the country is not entirely an economic one. It is bound up with our political and social attitudes. It is evident that, with the loss of common identity that we have experienced during the period of this Conservative Government, there is no willingness to look beyond the immediate returns of the ballot box. The Government say, "If they do not vote for us, we are not interested in them." We require a new political willingness on the part of Government to accept their responsibilities. They have manifestly failed to do that.
§ Mr. Leon Brittan (Richmond, Yorks)
I do not for one moment accept the criticisms made by the hon. Member for Glasgow, Maryhill (Mr. Craigen) about the attitudes of Conservative Members.
As one who has always represented a constituency in the north of England, I shall focus on the regional aspects of the debate. Indeed, as Secretary of State for Trade and Industry, I said to the Conservative party conference in 1985 that I regarded the vast gulf between the different parts of the country as being the greatest social and economic problem that faced us as a nation. I went on to say that, because regional industrial policy was one of the crucial instruments to bridge that gulf, we should never allow regional policy to become the Cinderella of industrial policy. I shall suggest some further important steps in regional policy that can and should now be taken.
Having said that, the picture presented by the Opposition has been an absolute travesty of reality. What is worse, the Opposition's policy proposals, if implemented, would make the disease far more severe. To inflate the economy by borrowing or to increase taxation on the scale that would be necessary to give effect to the Opposition's proposals would bring to a rapid halt the economic recovery and the expansion that are now taking place. As for the proposals by the alliance, although they may be wrapped up a hit more, they perhaps involve slightly less inflation in drag.
As some hon. Members have said, the divisions in the country are not only between the north and the south. That is a crude over-simplification. The divisions are between the older industrial areas and the rest. The west midlands is a good example of a part of the country that cannot be described as the north, even by shifting the map southwards, as my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) would have us do. It is important to understand what has happened and is happening in older industrial areas and not to accept a distorted view if we are to be able to take steps to put things right. Of course the recession involved an extremely sharp contraction in manufacturing activity and a tragically large number of job losses. Of course the assisted regions were hit worse. They were the areas in which, on the whole, old manufacturing industries existed.
Since 1981, there has been a significant increase in manufacturing output and investment. It is important that that increase has taken place in the regions as well as in the south-east. The economic growth currently taking place is substantial, impressive and soundly based. It will not collapse in an inflationary bubble, as happened with previous expansion. If regional disparities are more conspicuous now than in the past, it is not because the 812 regions are still in decline but because the growth of development and prosperity in the rest of the country is proceeding at an even faster rate. That is the real nature of the problem that we face today, and a correct perception of it affects what we should do about it Vital as industrial and regional policies are, in any country that does not have a Communist regime, or something approaching a Communist regime, economic rather than industrial policies most affect business men. What happens to interest rates? Where does the exchange rate stand? What are the levels and structure of taxation? What progress is made in fighting inflation? These factors most affect industrial prospects.
God help industry if those factors were to be determined by the kind of policies put forward by the Opposition. A sharp change in the exchange rate or a dramatic alteration in interest rates is likely to have far more effect on most companies than the introduction or withdrawal of some assistance scheme would have. The follies of the Opposition do not absolve us from the duty to do everything in our power to reduce the present gulf between different parts of the country. If hon. Members consider the congestion on the M25 before it was hardly open and examine the escalation of house prices in the south-east they will realise that it is quite apparent that progress towards the solution of the problem is just as important for the south-east as it is for other parts of the country. The solution is not to lure away vast numbers from the regions to swell the ranks of the south-east, even if we could find a way to do it. It would inevitably mean luring away a disproportionate number of the brightest and the best, leaving behind an increasingly pauperised population and an infrastructure that would become steadily more difficult and expensive to service.
They would be making a grave mistake if the Government thought that they could solve the problem by trying to decide which industries should thrive and which should fall, and deciding where that should take place, and then intervene on a massive scale to make it all happen. George Brown tried to do that. The ink was hardly dry on the national plan before it was hopelessly out of date. Cosmetic involvement by industrial institutions would not make such a plan likely to succeed today, as I heard hinted during the course of the debate.
My experience of politicians and civil servants does not lead me to believe that they are better able to pick the winners than those who put their own money at stake. Sometimes politicians and civil servants must make commercial judgments, but that is different from the Government seeking to design and put into place the future pattern of industry. Rather than doing that across the board, we should specifically tackle the problems of the regions both by action on the supply side and by direct regional assistance.
I do not accept the view of those who say that regional policy in the classic sense has failed. The latest study commissioned by the Department of Trade and Industry from the Cambridge department of land economy concluded that 630,000 jobs have been created over the years in assisted areas by regional policy. If we do not like the picture today—nor should we—the truth is that it would be far worse without such a policy. But it is obviously not enough.
I do not see any need for an ideological divide between those who wish to proceed along the route of regional 813 policy in the classic sense and those who believe in supply-side action. Both are necessary. If we are candid, we must accept that we do not know with sufficient certainty what works, so it would not be wise to reject either approach. The problem is of sufficient magnitude for it to be necessary for us to accept both.
Turning to the so-called supply side, I welcome the increased interest and discussion about regional pay bargaining. I do not think that it is too much to ask those who are fortunate enough to have jobs in the assisted areas to take a lower increase in pay to let more people on the dole get jobs. The problem in the north-east, for example, is not that those in work are too poor. It is that too many people do not have a job at all.
There is much to be said on that side of the equation for urgently examining whether income tax or national insurance rates can be regionally slanted to encourage employment in the regions. In addition, I would go further with the direct assistance to the regions; here I join the hon. Member for Maryhill. I think that we should give serious consideration to a fresh programme for the dispersal of Government Departments and agencies. There has already been substantial dispersal. If we are honest, it has brought problems as well as employment. If only people up to a certain grade move, the regional headquarters—they may be "headquarters" in name only—face the risk of becoming a backwater and problems of morale may be very great.
With totally new systems of communications developing rapidly, the need for top policy makers to stay in London is much less great than it was. We might well find on a fresh look that a whole new tranche of Government agencies could move out of London without any loss of efficiency. Although this step has not yet been taken, the Government have taken direct constructive action. I think that it is right to put on record the way in which regional policy has been evolving under the present Government. In recent months, there has been an announcement of new powerful urban development corporations—Trafford Park, Black Country, Tyne and Wear, Teesside and Cardiff Bay. That is a major new change.
It would be wrong to have a debate on this subject without referring to the city technology colleges. In the north-east, employers are saying that, with the upturn which has taken place, they have some jobs to give to youngsters. They regard it as a tragedy when people arrive hotfoot from school without the minimal skills of reading, writing and arithmetic which would enable them to be given the available jobs. Those colleges are part of regional policy and a major new development by the Government, but they are not the whole answer.
In many parts of the country, the problems of the regions are not just the problems of the inner cities. It would be a mistake to think that that is the case. There are parts of the regions—for example, the coalfields and the steel areas—where the problems are not in the cities but in the outlying areas. That is why I have become persuaded that a further necessary step is the creation of development agencies in some of the regions of England with a role comparable to that of the Scottish Development Agency and the Welsh Development Agency.
§ Mr. Peter Thurnham (Bolton, North-East)
Is my right hon. and learned Friend aware of the support of northwest Members for a north-west development agency along the lines that he recommended in his excellent pamphlet "To Spur, Not to Mould"? Does my right hon. and learned Friend agree that the budget of £600,000 for the north-west's existing agency Inward is meagre compared with the £90 million a year for the Scottish Development Agency?
§ Mr. Brittan
I am grateful to my hon. Friend for the support that he and many other colleagues from assisted regions have given to the ideas which I developed in that pamphlet. The argument against setting up development agencies in the regions has always been not that we do not like what such development agencies do but that there is nothing that they can do that cannot be provided by some other public body in England—the Department of Trade and Industry, English Estates, new towns, the Manpower Services Commission, and so on. To a large extent, that is true but, as so often, it is not the whole truth. The proliferation of public bodies and departments, each with different powers and functions, is a real turn-off for industry. However much co-operation there is between them, the attractions of a one-stop shop are immense.
For all its remaining and substantial problems, Scotland has leapt ahead of several English regions. There are many reasons for that, but it is difficult to avoid concluding that the distinctively Scottish system of encouraging industrial development has played an important part. The key feature has been the SDA. Apart from the advantage of it being a one-stop shop, it has greater flexibility than the combination of institutions south of the border and east of Offa's dyke. By being able to shift in a particular case as well as to deploy all forms of assistance, that flexibility is of great advantage to industry.
I make no apology for the fact that the Conservative party was extremely anxious about the SDA and the WDA when they were created. It had reason to be so, because at that time the tide of state ownership was rising. That is no longer so. My right hon. Friends the Secretaries of State for Scotland and for Wales, by changing the guidelines and the personnel running those institutions, have been able to allay the anxieties felt by the Scottish and Welsh Conservative parties.
In the case for development agencies in the English regions, one factor that is even more important than flexibility is the need to do something that will capture the imagination of people in the regions, not for political purposes but to stimulate growth and investment. The problems in the regions do not arise because of a lack of infrastructure, bad industrial relations or even lack of capital. Often they are caused by lack of confidence, an inherent pessimism which is the product of decades of decline. For that reason, I believe that a gesture of confidence, the creation of a regional focus in the setting up of development agencies, would stimulate industrial activity far more than the actual powers or levels of investment involved might lead one to expect. Let us not treat that as a panacea. It is one of many actions that must be taken on the supply side in relation to pay bargaining—a matter on which I have heard less enthusiasm from the Opposition for what I have said—and elsewhere.
It is just one further step along the road of progress. That is one road along which no one will be able to go far 815 unless—quite apart from the specific measures that we take to deal with regional matters—it is paved with the fiscally sound anti-inflationary policies which are the unique hallmarks of the Government's conduct of affairs.
§ Mr. Donald Stewart (Western Isles)
I regret the fact that time does not permit me to deal in detail with the speech of the right hon. and learned Member for Richmond, Yorks (Mr. Brittan). The parts when he dealt with Scotland showed that he knew little about the subject. His comments—he is not alone in this—revealed the problems that we suffer in Scotland. He was talking about the problems of the north-east. I have always been lectured that this is a unitary state and criticised for threatening the break-up of the United Kingdom. When some hon. Members talk about the north-east, they are talking about the north-east of England. The hon. Member for Bolton, North-East (Mr. Thurnham) talked about the north-west. He did not mean my constituency, although it is in Britain; he meant the north-west of England. I knew long before I became a Member that Britain equalled England and that Scotland, Wales and Ireland were periphery colonies which did not matter all that much.
I want to comment on the terms of the motion. In the business of the House for the week, it was said that the motion for the debate would be:The Divided Nation—Failure of the Government's Economic Policies".It is clear from today's Order Paper that we are discussing the Government's economic policies. Why the fudge by the Labour party? What has happened to the divided nation? I think that the official Opposition are just as keen as the Conservative Government to hide the facts about the divisions between the north and south. There is no word either in the motion about regional policies. Is it the intention of the Labour Opposition to soft-pedal in order to keep the south happy for votes?
What is certain is that there is a north-south divide. Everyone is aware that Scotland, Wales, Ireland the north-east and north-west of England and just recently the midlands are suffering. Certainly problems occur in a line from the Wash to the Severn. I know that there are areas of deprivation in the London area. I am also aware that there are areas of affluence in what is called the north. However, that does not alter the main argument, and any fair-minded observer would agred with the view of the editorial in The Guardian which stated:Britain is becoming two distinct economic nations—a prosperous south and a north in terminal decline.It is not an answer simply to say that it is the old smokestack industries that are in decline. It is the duty of Government to assist in replacing those industries and they should do that with regional policies. I agree with the right hon. and learned Member for Richmond, Yorks that regional policy should not be the Cinderella of policies and he should draw that fact to the attention of the Government Front Bench.
It is not an answer to say that lower wages would attract new industries. The Low Pay Unit has demonstrated that the poorest paid areas are invariably those with the highest unemployment. An even more ominous factor for the Government is contained in the conclusion of The Guardian editorial:That economic divisions almost coincide with political allegiance. Nearly all of the heavy job losses have been in Labour voting areas (Scotland, Wales, the broad north) while 816 job creations have been in the Tory-held prosperous south. Put cynically, the Government does not need to do much about this other Britain to stay in office.That may rejoice the hearts of Tories in the short-term, but there are hidden time bombs.
At Question Time today the Prime Minister was still rejecting any talk of a north-south divide. However, there is now the available evidence of the census of unemployment. That evidence showed that 94 per cent. of jobs lost in Britain since June 1979 were north of a line from the Wash to the Bristol channel and only 6 per cent. in the relatively prosperous southern regions. Despite the caveats that have been put in about the north-south divide, can anybody deny that it exists? Job losses have proved that divide in the United Kingdom.
In the period from June 1979 to June 1986, Scotland lost 216,000 jobs. That conflicts with what the right hon. and learned Member for Richmond, Yorks said about Scotland prospering. Since June 1986 the gap between Scotland and England has widened still further, with unemployment falling in England by 23,000 while it is still rising in Scotland where an extra 9,000 people have been put on the dole.
All this exposes the promises made, from time to time, by the previous Secretary of State for Scotland, who has now gone to the Ministry of Defence. He used to promise every year that Scotland's economy was on the turn. It also exposes the claim of the present Secretary of State that Scotland is leading the United Kingdom out of the depression. By God, if we are doing that the rest of the United Kingdom must be a poor soul.
The forecasts are not much better. The Mackay Consultants economic commentary forecasts thatScotland will suffer substantially from the fall in world oil prices. Obviously some firms and sectors will benefit from lower costs but these will be outweighed by the negative effects on the oil companies and the service companies directly involved in the North Sea.The Scottish Business Insider magazine has found that the continuing erosion of control of enterprises within Scotland has occurred as a result of recent mergers and takeovers. That will have a serious effect on the country. It states that 53 per cent. of the total capital employed in the big manufacturing and industrial sectors has been lost through takeovers of Scottish-owned companies. The divide is only too real.
The answer for Scotland, as my hon. Friend the Member for Dundee, East (Mr. Wilson) and myself have pointed out, is independence. A Scottish Assembly would find the pull of London too powerful. Norway, Sweden, Austria and Switzerland have the lowest rates of unemployment in the world. It is that league, not as a deprived region of the United Kingdom, that Scotland's survival obliges us to join.
§ Mr. Speaker
May I remind the House that the Opposition Front-Bench spokesman will seek to catch my eye at 9.20 pm.
§ Mr. Piers Merchant (Newcastle upon Tyne, Central)
I represent a constituency with acute social problems of high unemployment and chronic economic difficulties of structural imbalance. I hope that the House will understand why I will concentrate on the region's economic issues and the so-called north-south divide.
817 Let me join with others, especially my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan), in dispelling two myths. The first myth, which is the most dangerous, is that there is no regional problem. Anyone can prove anything if they select their facts sufficiently ruthlessly, but that can have no credibility in the north and should have no credibility in the south.
The second myth is that of the north-south divide. It dramatically appeals to the newspaper headline writers who are keen to sell second rate newspapers and to Opposition politicians who are keen to sell second rate policies. It is a simplistic and sweeping interpretation of the regional problems and does no service to the people who are suffering from those problems. Indeed, this simplistic portrayal is distortive and insulting. Its innuendo is that anyone north of the Wash is second best, downtrodden, helpless and hopeless. That is a travesty and a typical piece of patronising Socialism.
How on earth can the hon. Member for Stockton, South (Mr. Wrigglesworth) ever hope that the industry and investment which are seriously needed in the north-east can be attracted to that region if he pursues the tactics that he used when he talked about the north-east as if it was in the blackest possible situation, coming out with the whole issue of statistics and trying to prove that the situation was irredeemably hopeless? Frankly, his motive defeats me. It was a studied insult to those people who are trying to attract jobs and investment to the region by portraying the positive benefits, but the hon. Gentleman did not touch on those benefits. Let us talk about the positive side.
Unemployment in the north-east is now clearly and consistently falling, thanks to the Government's policies. In my constituency—a typical example—unemployment is now lower than it was in 1983. The old industries are being replaced and urban dereliction reversed. There are now new industries and investments which are being attracted to the area. The hon. Member for Stockton, South is obviously aware of the many good companies that have invested in the north-east in the past few years. Wealth is being created and as high a quality of life can be enjoyed there as anywhere else.
The region has an unparalleled number of attractions. Housing is of high quality but low price compared with elsewhere. Land is readily available for industrial development and there is a skilled work force ready to take the jobs. There are also many environmental attractions. Specific examples include 10,000 jobs that have been created by the Newcastle and Gateshead Enterprise zone. The massive Metro retail development—the biggest in Europe—has brought over 5,000 jobs. There is the great success of the Nissan plant that is already ahead of schedule with promises that 100,000 vehicles a year will roll off its production line in four years' time. Komatsu at Birtley has brought another 270 jobs; Barbour at Hebburn has created 100 jobs; Brown and Root at Jarrow, 117 jobs; and British Rail at Heaton has brought 180 jobs. Those jobs are connected with the east coast rail electrification, and that should win the support of the Opposition who are always talking about infrastructure development.
§ Mr. Merchant
I shall give way in a minute.
818 These are all examples from the last few months of jobs that have been created in the north-east. Two or three years ago, the Port of Tyne Authority made a regular loss of £750,000. It has now made a profit of £3 million. That is an important indicator of economic activity on the Tyne and in the north-east generally. It is not all gloom and doom.
§ Mr. Thompson
Does the hon. Gentleman realise that one third of the 83,000 young people in the north of England who are unemployed have not had a job in the last 12 months? They will not find any comfort in the hon. Gentleman's comments.
§ Mr. Merchant
I should have thought that there was much comfort in the north-east for those youngsters who, unfortunately, have not had jobs made readily available to them in the last few years. The Government have done a great deal for them. They have provided training opportunities and MSC schemes. I accept that only real and lasting jobs will result in real benefit, but the statistics demonstrate that real jobs are now coming to the north-east.
There is now great hope, but there are real problems. First, there is the social problem of unemployment, caused by the collapse of many traditional smokestack industries, the lack of competitiveness 10 or 20 years ago, caused by poor management and adverse labour attitudes, and the past lack of enterprise and investment and poor education and training.
Secondly, there has been structural inadequacy and a historic over-dependence on old, heavy industries. That has not yet been properly corrected. Thirdly, there is the problem of two-way labour immobility. Barriers have prevented managers and investors from moving to the north with their companies. Other hurdles have prevented employees from exercising their choice to move south to take up jobs. I shall deal with the latter point first, because it threatens to be the most serious problem. Certainly it is the most recent problem, and the Government must take urgent steps to tackle it.
Ironically, it is a function of the Government's success in economic terms that fast recovery and growth has taken place in the south-east. High and fast rising property prices in the south attract people both ways and inhibit the free operation of the market mechanism in regional and labour terms. These high prices are exacerbated by Government subsidies, hidden and otherwise, to housing and transport in the south-east. The north desperately needs the excess jobs of the south. It needs the companies and the investment that are locked near London. Northerners need the freedom to find homes in London, if they wish to move.
§ Mr. Michael Fallon (Darlington)
Is my hon. Friend aware that there are 120,000 empty council houses in all parts of the country and that thousands more council properties are hard to let or are impossible to let? Would he favour a national, computerised system so that any job seeker could go to any housing department in the country, tap into a terminal and see what is available in the region to which he wishes to move?
§ Mr. Merchant
That is an excellent suggestion. It would unfreeze the current rigid system of council house allocations.
We must free the housing transfer process by encouraging more low paid housing in the south, thus 819 reducing the speed of the price rise, while encouraging a high quality of environment and lower living costs—items like domestic rates—in the north. The advantages of the regions must be sold far more effectively.
§ Mr. Merchant
No, I shall not allow any other hon. Member to intervene, because time is short and I want other hon. Members to have the opportunity to speak.
In overcoming the historic image of the north, we must take firmer steps to diversify and modernise the industrial base of regions like the north-east. The Government deserve credit for what they have done. There have been some outstanding successes, but more incentives are needed. Grant aid is a great advantage, but that alone is not sufficient. Tax breaks, too, are essential. A uniform business rate must be introduced swiftly, as high rates in the north-east, particularly in the north, which includes the highest rated authority in England, have strangled local industry.
Next, basic income tax rates must continue downwards. The lower the rate the better. A 20 per cent. basic rate would do wonders for the north. Every example throughout the world illustrates that. The Government must continue to concentrate on simple tax reduction, or must enable depressed areas to benefit from a differential advantage—as, in a sense, the enterprise zone philosophy pursues.
Planning constraints, too, must be lifted, especially in depressed areas. How often we hear of companies that are keen to invest but then have to wait weeks or months as planners pontificate and councillors interfere before they all say no. That is why I welcome the creation of the new Tyneside urban development corporation. It will have the power and the drive to overcome the inertia within some local government organisations.
When it comes to direct Government employment and procurement, a lead must be given. There must be an appreciation of regional aspects. I agree with my right hon. and learned Friend the Member for Richmond, Yorks, who drew attention to the importance of having two approaches to regional policy, not just the classic one and not just the supply side approach, either. I do not believe that the Government have done enough to devolve Departments and state industries and to direct employment to the north. Therefore, the people who make the decisions remain in London, with a myopic metropolitan view of matters.
Furthermore, when it comes to Government orders, the Government must appreciate that, whether they like it or not, their purchasing power is so great that they cannot ignore the regional aspect. I am not making a case for subsidy, or unwanted orders for old industries. Indeed, attempts to prop them up are bound to be counterproductive and a cruel deception. However, there are industries that desperately need orders. To place those orders could dramatically alter their position and that of the local economy.
As an example, let me take NEI Parsons, a large and highly successful turbine generator manufacturer. NEI, in Newcastle, is modern, forward-looking and vibrant. It is a growth company. It has an excellent management team, forward-looking and positive union leadership and a fully committed record of high investment and productivity, yet within the last fortnight it has declared 800 redundancies, 820 partly because of the delay in domestic power station orders. This company does not ask for subsidies or for preferential orders. It is quite happy to stand by fair competition in the market place. It prefers fair competition. However, it needs orders to be available. There is a need for orders and I hope that my right hon. Friend the Chancellor of the Exchequer will take this point to his right hon. Friend the Member for Worcester (Mr. Walker), who on this matter has, I believe, been inert and complacent and who seems to be more worried about cranky rural pressure groups than about industrial jobs in northern Britain.
§ Mr. Merchant
I fear that, because of time, I cannot give way. I hope that I have addressed the points that are of concern to the hon. Gentleman.
However, nothing can compare with the sheer incapacity and the staggering incapability of the Labour bosses who have controlled the destiny of the north-east for more than half a century. Over this period, a Neanderthal attitude to economics, a Stalin-like obsession with central control and a fossilised self-view have catapulted this region backwards at a time when a pragmatic grasp of the opportunities available could have heralded a new era.
§ Mr. Merchant
Faced with the NEI redundancies, all that the Labour city council in Newcastle could do—and I fear that it reveals Labour's industrial policies nationally, too—was to waste yet further resources upon producing a boringly tedious and second-rate report and then to prepare a leaflet drop to every house in Newcastle, telling them what they knew already. However, it did not remind them of the NEI's rates bill of £2.1 million a year, which the city council levied, and the burden that that placed on the company. It is time that the Labour party faced reality and acknowledged that it has prolonged and wallowed in the concept of the north-south divide. When it had its chance, it did nothing to allay it. That is the reality that this House ought to be aware of, and it is the reality that people in the north of England know only too well.
§ Mr. Allan Rogers (Rhondda)
Other hon. Members have dealt with the broader aspects of this issue, but time demands that I should concentrate on regional and constituency issues. But some of the matters that have come up during the course of this debate have to be dealt with before I move on to talk about my region and constituency.
I agree with many Members that we are not necessarily talking about a north-south divide in the debate this evening. What we are talking about is a divide in this country between those who have and those who have not. Since the Government have been in power, that divide has grown even wider. In the majority of cases it is a north-south divide—although there is a substantial area to the west—but it would be wrong of us to polarise the issue into those geographical areas when there are high pockets of unemployment in areas such as Margate and Ramsgate in the south-east of England. There are areas of poverty in the south-west and other parts of the southern half of 821 this country. The argument is not about the north versus the south. It is about the rich versus the poor and the haves versus the have-nots.
No one can argue that there are not difficulties in the regions, because manifestly there are big differences whatever parameter or socio-economic indicator is used. These are problems of the past, as the right hon. Member for Henley (Mr. Heseltine) said, but they are not only the problems of the past, or the decline of the smokestack industries. If we look quickly at one statistic in regard to Wales, for example, the coal industry has had a job loss of about 13,000 people since 1979. But the number of unemployed in Wales has risen by over 100,000. One cannot blame the decline of the coal industry for the enormous increase in unemployment in Wales. Unemployment is a difficult problem that will not be solved by one simple action. It will take all the resources of Government, private industry and the public sector working together in an effective partnership to solve the problem. But it can be solved and I shall not get involved with the prophets of despair who are writing off areas such as the area that I represent.
The right hon. and learned Member for Richmond, Yorks (Mr. Brittan) talked about these regional differences. In one part of his speech he seemed to accept that they existed, but in the other part he did not want to accept them. Part of his panacea for the problems that are arising—I think I quote him rightly—was that "there should be regional pay bargaining." I should like to point out to the right hon. and learned Membe—at least, I would if he were present—that those regional pay differences presently exist. We do not need regional pay bargaining, and it is wrong of Conservative Members to say that workers price themselves out of jobs; that is manifestly not so. The difference in average wages between areas such as Wales and the south-east at the present time is £42.32. One can hardly accuse the Welsh of pricing themselves out of jobs.
I represent an area that is one of the most socially and economically deprived areas in the United Kingdom. My hon. Friend the Member for Caerphilly (Mr. Davies) helped me by providing some statistics, and I shall catalogue them in the hope that the Chancellor of the Exchequer and the Paymaster General will pay attention to the problems within my constituency. In my area we have the highest number of houses without indoor toilet facilities; the highest number of houses without a bath or shower; the highest number of pensioners lacking the same facilities; a perinatal mortality rate that is the highest in Wales; an unemployment rate of over 20 per cent.; an extraordinarily high level of youth unemployment; more likelihood of children suffering from measles and whooping cough; and, not surprisingly, the highest percentage of permanently sick people in the United Kingdom. That is a catalogue of deprivation.
But the statistics do not adequately demonstrate the misery and poverty in which some individuals live in my constituency and in areas in the north and in the south that are suffering from unemployment. They do not illustrate the struggles and difficulties of pensioners to achieve a reasonable quality of life. They do not adequately demonstrate the tragedy and disappointment of the young mother who loses a baby in the early days of the baby's life because of a lack of facilities. They do not demonstrate 822 the despair and disillusionment of a young man who has never had a job and has no likelihood of getting one in the foreseeable future. [Interruption.] I wish that hon. Members who have just come into the Chamber would listen quietly.
The Government amendment talks about the success of their economic policies and of healthy, balanced economic growth. We are entitled to ask the Paymaster General to tell us when he replies where that growth and success is and when we in Wales will have some share of it. We would certainly like to have some of it in my county and in my constituency.
The Chancellor, the Paymaster General, the Secretary of State for Wales and the Prime Minister constantly reiterate their excuses for unemployment. As I said earlier, they blame the decline of the coal industry for the problems that we face in south Wales, but our problems are much deeper seated than a simple decline in one industry. If we look across the job spectrum, we see that in manufacturing we have lost 113,000 jobs. In metal goods engineering and vehicles 52,000 jobs have been lost. Across the whole spectrum of industry we see that jobs have been lost. It is not simply the coal industry that is in decline; it is a region in decline and that region badly needs help. We are not pricing ourselves out of work. If the Government attach any importance at all to jobs in the engineering sector, they should help areas such as south Wales.
Earlier, I spoke about the statistics of my constituency which reflect the position in Mid-Glamorgan and Wales as a whole. I described what they meant for the pensioner, the young mother and the unemployed youngster. They mean despair, disappointment, disillusion, struggle, difficulty, and, in many cases, tragedy. That is mirrored elsewhere in the United Kingdom. That is the true meaning of Thatcherism. That is the true reality of Thatcher's Britain today. It is a divided Britain, governed by an uncaring Government.
§ 9.8 pm
§ Mr. David Howell (Guildford)
Not the least interesting aspect of the debate which is now coming to a close has been the distinct switch of emphasis that we have seen in the attempted assault of the Opposition Front Bench on my right hon. Friend the Chancellor and on the Government's record. Obviously, they have a major concern with unemployment, as we all do, and that has been reflected in many of the speeches. But they seem to be sensing that, now that my right hon. Friends are beginning to grapple effectively with unemployment and we are seeing the figures behave in a far more encouraging way, they must have a new theme. The theme that they have found is reflected in their motion on the Order Paper. It is the theory of the impending balance of payments crisis.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) has gone into the economic forecasting business. It is only fair to warn him before the debate is out that that is a hazardous business. It is all the more hazardous when he and his right hon. and hon. Friends appear to depend so heavily on independent forecasters in the much criticised City, as they do. They seem to refer again and again to what independent forecasters are saying about trade deficits, interest rates and sterling in the 823 coming year and what that will do to our employment performance and the social problems that we face in the inner cities that we have been discussing this afternoon.
The difficulty is that at least half the independent forecasters have so far been spectacularly wrong. Perhaps the right hon. Gentleman should keep that in mind. They were quite wrong about interest rates in the autumn which they confidently forecast would go up by 4 percentage points but did not. There was then a forecast that there would be a huge sterling crisis this month, but, of course, there has been nothing of the kind. I do not know whether the Labour party associated itself with that forecast. There have been other problems which I shall deal with in a moment, but there certainly has not been the collapse or the further slide in sterling that was predicted.
There was equal puzzlement and a failure to appreciate what would happen about labour unit costs. If I may say so, that error was apparent on both Front Benches and there was a cry that we would all be ruined by an enormous rise in labour unit costs that would offset the devaluation of sterling against the deutschmark. It was said that that would mean we would not restore competition or create new jobs, but the opposite has happened and once again the forecasters have got it wrong. Labour unit costs are coming under increasingly effective control and the original statistics about output and recorded labour costs were probably grossly inaccurate and are becoming increasingly so. Even if they were accurate, those same figures are developing in a far more favourable way.
We could be seeing something that over the last 20 years many of us doubted could happen, a devaluation or depreciation taking place without consequent inflation and without the inflation of wage costs which wipes it out. I have never supported the proposition that we can devalue our way into competition and more jobs and by that means can restore jobs and opportunities to the north and to our cities. In America one hears people say, "If only we could get the dollar down, everything would be all right." I say to such people that we have tried that in Britain and quite often it did not work. It worked briefly in 1966, perhaps, but on the whole it is a path to perdition and always inflation takes away the advantage.
It may just be that as a result of supply side changes taking place in our economy this time the depreciation will stick and, because labour unit costs are not going up, it may be that we have reached the point—an important turning point—when we are able to take advantage of a lower and more competitive currency and fairly pour our efforts into competition and export and provide the new jobs that we need, especially in the areas about which hon. Members feel strongly. The economists were wrong when they thought that labour unit costs were going through the ceiling. Hon. Members in the centre parties were muttering about incomes policies of bizarre kinds which would control this problem. Suddenly we see once again that analysis was wrong.
The second major area in which the independent forecasters upon which the Labour party has relied so heavily have been wrong has been the staggering growth in invisible earnings. If one looks back to the forecasts one finds that none of these independent forecasters or Opposition critics at all foresaw what was happening. There was a widespread myth, shared by many commentators, that North sea oil had been wasted. That was an easy thing to say and an easy myth to peddle. 824 People had not noticed, as my hon. Friend the Member for Croydon South, (Sir W. Clark) said earlier, that North sea oil proceeds were not being wasted.
Oil proceeds were being invested on a gigantic scale, largely, I concede, overseas, but as a result they are producing the most enormous annuity for Britain which can be invested in the competitive and high technology industries of tomorrow. As a result, Britain has become not a debtor nation like the United States but the world's second largest creditor nation after Japan and is in a position of immense potential power which will enable us to use those resources to solve our social problems and to underpin the new and more dynamic industries that we need for tomorrow.
That is another area where the economists got it all wrong. The independent forecasters did not forecast any of that. Instead, they looked at the current physical trade balance and saw ahead disaster, to which they eagerly assented. What we will see is a considerable offset in annuity which will flow in on a gigantic scale, possibly rising to £14 billion a year by 1990. That means that the trade problems which will inevitably arise when the oil runs down and when we have a slightly weaker oil price can be handled and are being handled.
The third thing that economists and critics of the Government did not foresee was the enormous rise in non-oil revenues which are now benefiting my right hon. Friend the Chancellor and enabling him now to talk about the possibility of an undershoot for public sector borrowing this year and, in my view, a possible undershoot next year as well. That will give a leeway in our budgetary practice without imprudence, which we have not known for a generation. My own strong view is that in a sense an undershoot is not a good thing, but without a doubt the leeway should be used. It is not good budgetary practice to achieve an undershoot, not least because in Whitehall the word goes out that pressure is off public spending and we can now put aside all those troublesome efficiency drives and all the rest. I hope that there will not be an undershoot and that the space will be used up by a judicious use of resources.
In my book, and I have never disguised this, we should concentrate, for social and economic and job reasons, on tax cuts. I cannot understand the view of the Opposition. I can understand the view of the more blinkered members of the Opposition but not the more sensible members when they are against tax cuts on low incomes. What are they talking about? Do they not listen to their own constituents or understand the enormous disincentives working on those on low incomes who have to pay some of the highest taxes and national insurance in the Western world? Have they not read the stories around the world of those nations and states where low taxes have produced fantastic growth in jobs? Have they not noticed that in California, a state with half the population of Britain, 2 million new jobs have been produced while taxes have been cut by 23 per cent.? The tax cut opportunity must be seized, not least because our competitors, the United States, Japan, Germany and France, are all going for major tax cuts and tax reform and changes in their structure.
If we do not follow that route, we will be disastrously left behind in terms of creating jobs in the inner cities and the areas in the north where we must get them back. If hon. Members say that we should not have tax cuts now because it will increase consumption and suck in imports—and I do not believe it will—if that is the fear, let us 825 go for the sort of tax cuts that encourage personal ownership and investment and savings. Let us copy the ideas of the Loi Monory in France and have front end relief for saving and transfer from State saving, which has on the whole been disastrously inefficient to personal ownership and personal saving which can be mobilised for the new industries and new jobs which we need. There is plenty for my right hon. Friends to do in that area on capital taxes and on all levels, basic rate tax and higher rate tax as well. Taking the example of capital transfer tax, in real terms, in the form of its inheritance tax, that is now higher than in 1974 when it came in. I hope that my right hon. Friend will bring that back to the level it was at when the Labour party introduced it.
Finally, as it has come into the debate in the motion on BTR, although that matter has been resolved, and I am glad it has been, I believe the Secretary of State was totally and utterly right in the line he took. I congratulate him on keeping his head and on keeping calm when those about him were losing theirs. I was glad to see that he stuck to the competition definition in his ruling. I was dismayed to see reports that some of the junior Ministers in the Department of Industry seemed to be putting distance between themselves and him. I hope that is not correct, that the newspaper reports were misleading and that the Ministers concerned will explain themselves. I believe that my right hon. Friend is entirely right. I did not like the ominous suggestion of some hon. Members that we should redefine a new idea of public interest for controlling mergers. We know where that idea goes, towards more bureaucratic vetting of mergers, back to the world of the IRC and all the monopolies and mergers which were put together in a spirit of rationalisation in this country with catastrophic results. We are living with them today.
The British Motor Corporation merger with Leyland was a classic example of alleged public interest prevailing over competitive forces. We do not want to go back to that kind of thing. I believe that we may be looking at the wrong end of the problem altogether. In America, they are terrified of mergers and I think that there is a merger mania as well. The answer probably is to look at the excessive ease with which people can raise capital to conduct these takeover raids, the world of jump bonds, leverage buy-outs and the rest. It may be that the view should be focused at the capital raising end to see if there is not an excessive ease for people, often of not the highest repute, to raise capital and raid much larger concerns. Policy should be concentrated on that end of the process rather than on worrying about the consequences at the other end. If the capital access side is cured and the financing of takeovers is better managed, the consequences will be much more satisfactory and we will not be left with the sort of rows that we have had over BTR and Pilkington.
I said at the beginning that the impending crisis thesis was put forward by the right hon. Member for Sparkbrook. In one sense the right hon. Gentleman might be right; there might be an impending crisis, not in this country—we are in a stronger position than we have been for a generation to meet the rough seas of the world—but in America. We may see there a real disaster—a crash landing for the dollar, a huge hike in interest rates and vast currency instabilities. All that could produce a 826 crisis, but my right hon. Friend has built for us an economy that is stronger to face world difficulties than for many years past.
§ Mr. Seamus Mallon (Newry and Armagh)
Mr. Speaker, you have given me exactly one minute. I should like to say thanks; had I more time I would say, thank you very much.
That the only representative from the North of Ireland—the region with the highest rate of unemployment, the highest cost of electricity, gas, coal and food, and the lowest rate of wages—is allowed a one-minute contribution to the debate convinces me that the motion, which says that the economic situation has led to a divided nation, is right. Indeed, I might conclude that it is an ill-divided nation.
§ Mr. John Smith (Monklands, East)
It is sometimes said that the difficulty with the Government is not so much their policy as the way in which they present it. Time without number, speakers, particularly at Conservative party conferences, tell us that. I am afraid that in the case of the Chancellor of the Exchequer it appears to be both. Today he was asked in an intervention by my hon. Friend the Member for Workington (Mr. Campbell-Savours) about what some people regard as a minor point but what many people in the regions, particularly industrialists, regard as important—the moratorium which has been imposed upon the payment of regional development grants. The Chancellor replied that there was not a moratorium, merely a delay in payment.
To check the matter, I looked at volume II of the public expenditure White Paper. On the front it says:Presented to Parliament by the Chancellor of the Exchequer".What did I find? At page 93 it says:In order to spread this expenditure"—that is, RDG expenditure—further moratoria have been imposed on payments of RDG, to cover new RDG as well as old.If that is not a moratorium——
§ Mr. Smith
Ah, it is a delay in payment. I have obviously got it wrong again. I must try harder. Try as I must to say that this is not a moratorium, when I go back to consider the figures I find that the Chancellor unfortunately told Parliament in the document that was presented to us last week:further moratoria have been imposed".That seems to be a classic case of failing to present the case properly.
When we think about it, what is the difference between a moratorium and a delay in payment? Is not a moratorium no more and no less than a delay in payment? What is the Chancellor of the Exchequer trying to tell us when he says that it is not a moratorium but merely a delay in payment? I should be delighted to give way to the Chancellor if he would like to get to his feet and tell us the significant difference between a moratorium and a delay in payment. If there is a significant difference, significant enough for him to make such a point about it, it is time we knew what the difference is. If there is no difference, what on earth was he saying to my hon. Friend the 827 Member for Workington? I do not see the Chancellor dashing forward to elucidate that point, but I think he should try a little harder. That is not a minor point——
§ Mr. Lawson
I was anxious, for the sake of the House and also for the sake of business and industry and, indeed, the areas, that they should not have thought that there was a period during which applications would not be accepted—[Interruption.] That was what I was making quite clear to the House.
§ Mr. Smith
That would be a moratorium on applications. Unfortunately, the White Paper says:further moratoria have been imposed on payments".Therefore, the Chancellor's explanation will not do. It is disgraceful if the Chancellor does not know that it applies to people who have applied for and properly been given grants. Those people have already qualified, been told that they will get the grant and conducted their business on that basis. However, suddenly out of the blue comes a moratorium, a loss of or delay in payment, and they are told that they cannot get the grant.
I refer to an article in the Glasgow Herald on 15 January 1987 on the reaction of one industrialist, Mr. Bill Miller, the managing director of an electronics company and the vice-chairman of the CBI in Scotland. He said that the additional delay would mean an overdraft for him of £200,000, and that it would stop the recruit:ment for three jobs in his company. He said that that would be repeated all round the country. Perhaps the next time that the Chancellor considers regional development grants, he will think a little more carefully about them.
While I am on the subject——
§ Mr. Brittan
If the right hon. and learned Gentleman wishes to be accurate and fair, will he point out that that is because expenditure on regional development grant has increased—[Interruption.]—as my right hon. Friend the Chancellor made absolutely clear, in the sense that it is greater than that set out in the plans? The right hon. and learned Gentleman should welcome that.
§ Mr. Smith
I must not blame the Chancellor for his right hon. and learned Friend's intervention, because I am determined to be fair.
The notion that there has been an increase in regional development grants and that that has caused the problem can be assessed in the light of the following information. In 1982, regional development grants amounted to £812 billion. By 1986, that had been almost halved, to £396 billion. It has been projected to go down to £187 billion.
§ Mr. Brittan
That is entirely unworthy of the right hon. and learned Gentleman because he knows perfectly well that I was talking about the planned expenditure for the relevant year, which has been increased. He will get nowhere with tricks and twisting of that kind.
§ Mr. Smith
The right hon. and learned Gentleman did not allow me to finish what I was about to say before he interrupted me again. I am anxious that the House gets all the facts and not just the facts that he wishes the House to hear.
828 I should make it clear that regional development grants were halved between 1982 and 1986 and that they will be halved again. The Government should not say that they are surprised at the job losses in the regions and that manufacturing industry is failing when money is being pulled out on such a scale.
§ Mr. Smith
No, I shall not give way because I can handle only one intervention at a time.
The right hon. and learned Gentleman said that there is a problem because there is an old scheme and a new scheme and that there is a slight increase in expenditure because the old scheme overlaps the new scheme. If that is not what he said, it is what the Treasury told me when I asked, and that is probably as good a source as any. If this slight bulge is to be the reason for imposing a moratorium, one would have thought that the sensible thing would be just to pay the money to which people are entitled.
I shall leave the Chancellor of the Exchequer shortly. However, in the debate he told my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) that he should have read the Brown report on the influence on income tax because it was in the Library. Taking the Chancellor at his word, I went to the Library and was told that not only is it not there, but that there is no record of it having been deposited there.
§ Mr. Lawson
I have nothing to apologise for. The Library and I regret that it made a slight error which I shall come to in a moment. [Laughter.] The document was sent by hand to the Library on 18 December. When I heard that the right hon. and learned Gentleman had been unable to find it, I inquired of the Deputy Librarian what had happened. I have a letter from him, apologising to me for the fact that the Library had put it in the statistical section of the Library.
§ Mr. Smith
I am glad—[HON. MEMBERS: "Withdraw."] Faced with such overwhelming evidence, I have to withdraw the statement. However, the fact remains that when I went to the Library I could not get the document, so I am not gaining from this. Perhaps the solution is that the person who sent it to the Library said that there should be a moratorium on its being made available to the House.
At the heart of the Government's case has been an increase in productivity. They cannot say that there has been an increase in jobs in manufacturing industry, because we have lost 2 million jobs there, nor that there has been an increase in output, because it is still 4 per cent. below the 1979 level.
§ Mr. Smith
Manufacturing output, then: we have got that right. The Chancellor agrees that manufacturing output is still 4 per cent. below what it was in 1979. We are told that that is all right because of an increase in productivity, but let us get one matter absolutely clear: anyone can achieve an increase in nominal labour productivity, if in a declining industrial economy job losses over the same period are even greater than the fall in 829 output. Therefore, the Government have merely managed to ensure that output has not fallen so calamitously as jobs. For that reason there is an underlying growth in productivity. Productivity in a declining industrial economy such as ours is not what we want. We want increased productivity in an expanding industrial economy, and that we certainly have not had.
The proper indices in this matter are employment, output, investment and trade balance. They are far more important than this bogus productivity figure. The employment figure has decreased by 2 million, manufacturing jobs have decreased by 28 per cent., manufacturing output has decreased by 4 per cent., manufacturing investment has decreased 17 per cent. since 1979, the manufacturing trade balance was in surplus to the tune of £5 billion in 1980 and the figure for 1986 is estimated to be £7.5 billion. It is not merely a matter of a deficit of £7.5 billion, but of problems with the new industries.
If the Chancellor considers the figures, he will discover that between 1979 and 1986, 211,000 jobs were lost in the electronic and electrical engineering industries. Well over 200,000 jobs have been lost in the new industries as well as in the old. As the Secretary of State for Trade and Industry should know, if he pays attention to these matters, there is a serious balance of trade deficit in the high-tech industries as well as in others.
The Secretary of State for Trade and Industry should have been replying to the debate. When we have a debate on regional policy and manufacturing industry, his place is at the Dispatch Box. We understand that he cannot involve himself with one half of his Department because of an interest through his family connections. However, he should not disable himself from the other half of his Department through non-interest in the House. It is his duty to answer such debates. I hope that on the next occasion that we debate manufacturing industry and regional policy, he will be present—[HON. MEMBERS: "He is here now."] He may be present now, and it might be helpful if we could have a contribution from him as he is responsible to Parliament.
Some hon. Members have queried whether the north-south divide, which has taken hold of the public imagination in recent weeks, exists. People will argue for ever about that. I want to consider a Government document—the submission to the regional development fund. That document can be found in the Library if one asks for it. However, the Government will not publish it. The only way to get anything from the document is to make a photocopy of the copy in the Library. I would not say that that was a symptom of the open society or a way of disseminating information, but if one is industrious enough and prepared to waste public money on the photocopiers information can be obtained.
The most important fact in the document is that unemployment in 1990, on the projection made to the European development fund, will be 3,117,000. What is all this nonsense about unemployment falling when in 1990, according to the Government document, unemployment will be above 3 million? That is only three years from now. Either the figure is wrong, in which case the Government are telling lies to the European Community, or it is correct. It is a forbidding prospect that in 1990 there will be more than 3 million unemployed on the basis of the Government's figures.
830 To support the Government's submission, the document recounts details of the various regions. It states about the west midlands:There is little prospect of an improvement in the region's basic unemployment problems between now and 1990.About Scotland it says:Little possibility of sufficient expansion.About Yorkshire and Humberside it states:Employment levels are unlikely to rise in the short or the medium term.With regard to Wales it states:Overall economic activity lower than any other region of Great Britain and expected to remain so during the period to 1990.With regard to the north-west, it states:Prospects for reducing unemployment are frighteningly bleak.
§ Mr. Smith
I simply do not have time to give way.
That is the Government's assessment of the north-south divide. Faced with that, the Minister must not tell us that there is no north-south divide. Let him not tell us that there have not been significant job losses in each of those areas.
Since 1979, in manufacturing industry 281,000 jobs have been lost in the west midlands; 109,000 have been lost in the east midlands; 248,000 in Yorkshire and Humberside; 337,000 in the north-west; 140,000 in the north; 115,000 in Wales; and 132,000 in Scotland. That is a total of 1.5 million in those regions.
§ Mr. Smith
It is not simply a north-south problem. Opposition Members who represent inner-city areas of London know perfectly well the serious problems that exist in the south. It ill becomes Conservative Members to remind us of that. Hon. Members who represent Luton and Swindon know perfectly well the serious problems that exist in manufacturing industry.
Some 476,000 jobs have been lost in manufacturing industry in the south. There is a north-south problem. However, overlying that there is the desperate problem of the decline of our manufacturing industry. That has been accentuated, because the Government have simultaneously withdrawn regional support and regions intertwined with industry have borne the brunt of the damage. However, all Britain has suffered. We are all diminished by the north-south divide and we are all impoverished by our industrial society.
That is why one of the greatest sins of the Government is to have turned their back on manufacturing industry. Where did they turn to? They turned to cast their favours on the City. I understand that the Chancellor of the Duchy of Lancaster said in a television programme today that the Labour party did not even contemplate legislating about insider dealing. That suggestion has certainly been made on a number of occasions—[Interruption.] I hope that the right hon. Member for Chingford (Mr. Tebbit) will forgive me if I put the matter straight. I have to remind the House that the Labour party produced provisions for insider dealing in the Companies Bill 1978. The Bill did not reach the statute book because a general election intervened and the Conservative party would not agree to let the Bill go through—[Interruption.] The proof is 831 that the same provisions appeared in the Companies Act 1980 initiated by the Conservative Government, and are now law.
§ Mr. Smith
In the short time I have available, I can say merely that the City is racked by many scandals. We heard today from the Chancellor that there is activity by Morgan Grenfell and that the Bank of England is taking a close supervisory role. It is clear that the management of Morgan Grenfell will have to change substantially and that it will have to change its courses and priorities. I suggest that it stops paying £20,000 to the Conservative party. That would be a good start to its change of policy and direction.
In the debate on the Companies Bill in 1974 the Secretary of State for the Environment said:I wonder whether insider dealing…is such an abuse as is supposed by many right hon. and hon. Gentlemen. It could have some beneficial effects. If a company were to continue to conceal some catastrophe…or some great turn-up for the books made it a great deal of money, and this news was suddenly released, the change in the share price would be dramatic. But if there is some half knowledge of this event and buying and selling takes place, the change in the value of the shares will be moderate, with possibly beneficial consequences."—[Official Report, 17 January, 1974; Vol. 867, c. 983.]I do not put that forward as a strong argument but it could be used for saying that a little knowledge of the affairs of companies leaking out is a good thing. That was the prevailing view of the Conservative party until recently. The Government are acting on the City because they have to. The Government need to take much tougher action and I hope that they will not resist doing so.
Above all, we condemn the Government for dividing us, for impoverishing us and for not showing the responsibility which a former Prime Minister called for today but which I do not think the Government will be ever able to show.
§ The Paymaster General and Minister for Employment (Mr. Kenneth Clarke)
The right hon. and learned Member for Monklands, East (Mr. Smith) has just replied to what was billed as—[Interruption.] With his usual skill and wit, he took the first 10 minutes of his speech in this major debate arguing about a footnote in the White Paper about a delay on payments on regional policy. He then had a discussion about where in the Library it was possible to find a copy of a particularly readable report that was commissioned by the previous Labour Government. He then moved briefly through a discussion on a long-published document about regional development grants and wound up with his great defence about how in 1979 the Labour party had actually introduced a Bill dealing with insider trading, which was not a criminal offence during their period of office. I remind the right hon. and learned Gentleman that the Companies Bill 1973, which sought to make insider trading a criminal offence was dropped because of the 1974 election. The Labour party did absolutely nothing about it until, as a death bed conversion, it produced a Bill in 1979 which fell at the election, so we promptly introduced the legislation upon which we are now relying. With that last, totally fallacious piece of City bashing, we saw the end of the Opposition's 832 case, which as my hon. Friends will have noticed, did not include one word of policy on the north-south divide, the City, or anything else. That was the Opposition's case.
The right hon. and learned Member for Monklands, East overran the time that was allocated to him in dealing with all that stuff. It is obvious that, having to put off this debate last week, having tried to turn it into a debate on Pilkington—which is why the Opposition said that my right hon. Friend should reply to it, and bearing in mind that the Pilkington issue is finished—Opposition Members are trying to talk it out. They actually asked for it. I remind them that, when it was first envisaged, the debate—I am as puzzled as the right hon. Member for Western Isles (Mr. Stewart) as to why it was asked for—followed the great Shadow Cabinet meeting that was meant to presage the pre-election attack on the economy and unemployment. Out of that Shadow Cabinet meeting we were supposed to hear the Opposition's economic policies. There was not a word. Only one word of Labour policy has emerged from the debate, and that was the most astonishing commitment by the man who wants to be the next Chancellor of the Exchequer. He will put up taxation if we reduce it. That is the only statement that we have heard today on what is meant to be a serious economic and employment issue.
I propose to deal, as my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan), my hon. Friend the Member for Newcastle on Tyne, Central (Mr. Merchant) and others wanted to deal, with the alleged north-south divide that was trailed before the debate actually started. Of course we all accept that there is a marked difference between the economic and industrial life of the north and the south of England. There always has been—it is nothing new—and there always will be—[Interruption.]—a difference in the way of life. Of course we all believe in some regional distinctions.
During the debate we have been concerned, first, with arriving at a more sensible definition of the problem. Hon. Members, apart from Opposition Front Bench Members, have accepted that there is a far more complicated pattern of pockets of relative deprivation and problems alongside pockets of great prosperity. Parts of the north are exceedingly prosperous, and so are parts of the south. But we cannot walk around the streets of Peckham and tell people that the problems of employment are confined entirely to the northern industrial cities. They are quite large areas. Their economic activities differ. Unemployment in Clitheroe in Lancashire stands at 5.2 per cent. Unemployment in Thanet in Kent stands at 20 per cent. Obviously, we must tackle those differences, and those are the things that we are tackling.
Where there is a regional difference, and undoubtedly there is, it arises because, as most hon. Members who seriously addressed themselves to the problem have conceded, there has been a change following the reduction in employment in traditional heavy industries. Opposition Members have sought to express the view that the decline in employment occurred, for the most part, in those areas which, in the past, depended most on heavy traditional industry.
§ Mr. Clarke
I shall not give way. I have used almost all my time.
833 That decline has taken place most heavily in places that were most dependent on heavy traditional industry. This fall in employment in manufacturing industry has been taking place in the Western world. The loss of jobs in manufacturing industry was faster in the late 1960s and early 1970s than it is now. The reason why it was so severe in 1979, 1980 and 1981 was that we inherited over-manned and uncompetitive heavy traditional industry, so the fall became most marked.
Out of that, the Opposition tried to construct the north-south divide. As Opposition Members often do, they turned to the hon. Member for Dunfermline, East (Mr. Brown) to produce an analysis of an article in the Department of Employment Gazette to try to reveal new facts to support their case. No hon. Member could explain how the hon. Member for Dunfermline, East arrived at his conclusion that 94 per cent. of jobs lost were in the north of England figure. I shall explain it at length afterwards. I know how he did it. It was a clever analysis of a document that he got three days ahead of publication. In fact, manufacturing jobs have been lost in the manufacturing areas, but 28 per cent. of the manufacturing jobs lost have been in the south of England. According to the Labour party's definition, 40 per cent. have been lost. But that loss of jobs is not the problem that we are facing. We should be facing the situation of rising total employment. If there is a problem, it is that the additional jobs are increasing more rapidly in parts of the south than in parts of the north. But that is not the analysis put forward by the Opposition.
Over the past three years, a net growth in jobs has been taking place in each region in England—3 per cent. in the northern region, 1 per cent. in the north-west and 4 per cent. in Yorkshire and Humberside. Unemployment is falling steadily—that is the Opposition's problem. Over the past year, the fastest fall in unemployment has been in Wales, the north, the north-west and the west midlands. Youth unemployment is falling everywhere and is falling faster in the northern regions. Since 1983, 6 per cent. more jobs have been created in the south-east and in the south-west. In East Anglia there has been a 13 per cent. net additional growth in jobs. Now that we have growth, better economic performance and competitive industry, the growth in output and employment is occurring faster in some parts of the country than in others.
Like my right hon. Friend the Chancellor and some of my hon. Friends who have spoken in the debate, I am a northern Member. We must tackle the problem. Our approach when we see that the recovery and the growth of new jobs is occurring faster in the south than in the north is to address ourselves to the problems of making the north as attractive a place for new investment and new business as the south and of ensuring that it widens its economic base and attracts those types of industry that give rise to growth in the south.
We are looking forward to a new northern economy. We are bringing in new ideas to stimulate growth. We are encouraging enterprise and entrepreneurship there. Nevertheless, the Labour party takes a different view. it looks back to the heavy traditional industrial base of the north, talks about the old policies that it followed and tends in its pronouncements, especially simplified ones, to 834 feed southern prejudices and images of the north which it has created with cloth-cap poverty and deprivation—the picture that Labour Members like to paint.
Labour Members have not addressed themselves throughout the debate to all the policies that are beginning to attract new industries to the north—what we are doing to put money in to clear up the derelict land; the urban development corporations which we have have set up on Tyneside and Teesside and at Trafford Park to speed up development; the enterprise zones, which we have set up in the middle of the industrial cities there; the enterprise agency network, which we have set up across the country; and the work of the city action teams and inner city teams in Leeds and Middlesbrough, which are bringing new training and new employment opportunities to people in those places.
Labour Members have not addressed themselves to the way in which we are developing a public-private sector partnership, working beside groups such as Business in the Community and putting money into the Prince of Wales' youth business trust to get young people trained for a more modern economy. It is by giving people in the north more training, not just in skills, but in entrepreneurship, and by making the area more attractive to new investment that we have enabled people to take advantage of the lower costs in the north and build on that growth in new jobs, which, I repeat, is already taking place there.
Unemployment is falling faster in the north, than in the south. It will be helped by better industrial relations in the north, by the fact that Nissan is attracted to Washington new town and by the ability to have a single union deal with the union that will promote flexible working practices—the type of things that the TUC and half the Labour movement spend their time resisting. Even when we look at regional pay differentials, as my right hon. and learned Friend the Member for Richmond, Yorks did, horror is aroused in the minds of most Opposition Members.
The Opposition emphasise a totally different approach to regional policy, one based on arguments about grants. It is about time that we acted as we have to make the grants more selective, to stop the waste that occurred under the old system and to concentrate grants, as we do, more on jobs and specific areas and to target them better. Just to defend regional policy in its traditional form, as my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) sought to do, is to ignore the failures of regional policy in the 1970s.
There are those who say that the west midlands is now an example of the north-south divide. It is no good going back to the west midlands and saying that the regional policies of the 1970s, which barred new development in that region, did not contribute to its problems. It narrowed its economic base and that economy collapsed when the vehicle industry failed. It was a victim and not a beneficiary of the Labour party's regional policy. That is the opinion in the region.
§ Mr. Clarke
I know the midlands better than the hon. Gentleman.
We have also been treated to a little bit of City bashing. That was rather forlorn, because I was delighted to hear, as were, I am sure, many Members, that the Pilkington bid is now a dead issue.—[Interruption.] It is thanks to the 835 fact that Pilkington was able to produce good profit forecasts. The bid has collapsed and the market has resolved the problem. We did not have the delay of a reference. It is no good Labour Members claiming that it was their lobbying that produced that result. That matter was satisfactorily resolved by the market.
My right hon. Friend the Member for Old Bexley and Sidcup and other hon. Friends have said that we should examine the rules in the light of the Pilkington reference. They believe that we have narrowed the rules too much by concentrating on competition. We have not changed the rules and it is still possible for Ministers to take a wider view of the public interest. I invite Members to consider the reference of the Gulf Resources' bid for IC Gas. [Interruption.]
§ Mr. Clarke
It is simply not true that it is right to move in, ad hoc, in response to political pressures and make up the rules—as some hon. Members seem to imply—one by one as we go along. It is not right to apply political judgment to the way in which one makes efficient use of assets. That is the danger of the approach that is suddenly advocated by the Labour party. It has given up any attempt to woo those in the City and has opted for crude City bashing to arouse prejudice against the City across the country.
The idea that Labour Ministers will take a closer political role in making such decisions does not fill me with joy in regard to employment or any other matter. If Labour Members were in a position to take decisions on mergers, such decisions would be taken in response to lobbies from within unions, interest groups inside the Labour party and with an eye on marginal seats. Any assertion that jobs and companies in the north would be safe in the hands of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and his right hon. Friends should send a shiver down the spines of those not only in board rooms but in the workplace of most companies likely to be affected.[Interruption.]
§ Mr. Clarke
I was asked about controls within the City. The fact is that my right hon. Friend the Secretary of State and my hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) have introduced a great legislative change that has greatly strengthened the powers of the inspectors and greatly improved the policing of the City.
Some have asserted that one can already demonstrate that self-control and self-regulation have failed. It is far too premature to do so considering that self-regulation has rapidly applied itself to the current problems in the City. That is thanks to the efforts of my right hon. Friend the Secretary of State and the Minister.
My right hon. Friend the Member for Old Bexley and Sidcup asked how fast the new machinery can work and he questioned whether there is a risk that prosecutions will be delayed as the case goes from the inspectors to the Director of Public Prosecutions. I remind hon. Members that allegations of insider dealing at Morgan Grenfell were immediately referred by my right hon. Friend the Secretary of State, and one member of that institution, Mr. Collier. has been charged as a result of the actions taken.
I have specified our position on employment, the economy and the City. Throughout the debate we have 836 heard nothing from the Labour party about its proposals. We have had distortion of the figures in an attempt to try to construct a crude north-south divide. The vision that the Labour party offers the north is absolutely depressing. When it first tried to raise this issue, it organised a Jarrow march—not like the one that the Labour movement boycotted in the 1930s. This one was financed with all the media hype that the Labour party could manage—the brass bands, the trade union banners, the look back to the old image of the north that it was trying to revive. There is genuine unemployment in the north, which we are tackling. All the brass bands, all the banners and all the rubbish that we have heard in this debate from the Opposition offer no hope to the north.
§ Question put, That the original words stand part of the Question:—
§ The House divided: Ayes 206, Noes 355.840
|Division No. 61]||[10 pm|
|Abse, Leo||Davies, Rt Hon Denzil (L'lli)|
|Adams, Allen (Paisley N)||Davies, Ronald (Caerphilly)|
|Alton, David||Davis, Terry (B'ham, H'ge H'l)|
|Anderson, Donald||Deakins, Eric|
|Archer, Rt Hon Peter||Dewar, Donald|
|Ashdown, Paddy||Dobson, Frank|
|Ashley, Rt Hon Jack||Dormand, Jack|
|Ashton, Joe||Douglas, Dick|
|Atkinson, N. (Tottenham)||Dubs, Alfred|
|Bagier, Gordon A. T.||Dunwoody, Hon Mrs G.|
|Banks, Tony (Newham NW)||Eadie, Alex|
|Barron, Kevin||Eastham, Ken|
|Beckett, Mrs Margaret||Evans, John (St. Helens N)|
|Bell, Stuart||Fatchett, Derek|
|Benn, Rt Hon Tony||Field, Frank (Birkenhead)|
|Bennett, A. (Dent'n & Red'sh)||Fields, T. (L'pool Broad Gn)|
|Bermingham, Gerald||Fisher, Mark|
|Bidwell, Sydney||Flannery, Martin|
|Blair, Anthony||Foot, Rt Hon Michael|
|Boothroyd, Miss Betty||Forrester, John|
|Boyes, Roland||Foster, Derek|
|Bray, Dr Jeremy||Foulkes, George|
|Brown, Gordon (D'f'mline E)||Fraser, J. (Norwood)|
|Brown, Hugh D. (Provan)||Freeson, Rt Hon Reginald|
|Brown, N. (N'c'tle-u-Tyne E)||Freud, Clement|
|Brown, R. (N'c'tle-u-Tyne N)||Garrett, W. E.|
|Brown, Ron (E'burgh, Leith)||George, Bruce|
|Bruce, Malcolm||Gilbert, Rt Hon Dr John|
|Buchan, Norman||Godman, Dr Norman|
|Caborn, Richard||Golding, Mrs Llin|
|Callaghan, Rt Hon J.||Gould, Bryan|
|Callaghan, Jim (Heyw'd & M)||Gourlay, Harry|
|Campbell, Ian||Hamilton, James (M'well N)|
|Campbell-Savours, Dale||Hancock, Michael|
|Canavan, Dennis||Hardy, Peter|
|Carlile, Alexander (Montg'y)||Harrison, Rt Hon Walter|
|Carter-Jones, Lewis||Hart, Rt Hon Dame Judith|
|Cartwright, John||Hattersley, Rt Hon Roy|
|Clark, Dr David (S Shields)||Healey, Rt Hon Denis|
|Clarke, Thomas||Heffer, Eric S.|
|Clay, Robert||Hogg, N. (C'nauld & Kilsyth)|
|Clelland, David Gordon||Holland, Stuart (Vauxhall)|
|Clwyd, Mrs Ann||Home Robertson, John|
|Cocks, Rt Hon M. (Bristol S)||Howell, Rt Hon D. (S'heath)|
|Cohen, Harry||Howells, Geraint|
|Coleman, Donald||Hoyle, Douglas|
|Conlan, Bernard||Hughes, Robert (Aberdeen N)|
|Cook, Frank (Stockton North)||Hughes, Roy (Newport East)|
|Cook, Robin F. (Livingston)||Hughes, Sean (Knowsley S)|
|Corbett, Robin||Hughes, Simon (Southwark)|
|Cox, Thomas (Tooting)||Janner, Hon Greville|
|Craigen, J. M.||John, Brynmor|
|Crowther, Stan||Jones, Barry (Alyn & Deeside)|
|Cunliffe, Lawrence||Kaufman, Rt Hon Gerald|
|Cunningham, Dr John||Kennedy, Charles|
|Dalyell, Tam||Kinnock, Rt Hon Neil|
|Kirkwood, Archy||Robertson, George|
|Lambie, David||Robinson, G. (Coventry NW)|
|Lamond, James||Rogers, Allan|
|Leadbitter, Ted||Rooker, J. W.|
|Leighton, Ronald||Ross, Ernest (Dundee W)|
|Lewis, Terence (Worsley)||Ross, Stephen (Isle of Wight)|
|Litherland, Robert||Rowlands, Ted|
|Livsey, Richard||Sedgemore, Brian|
|Lloyd, Tony (Stretford)||Sheerman, Barry|
|Lofthouse, Geoffrey||Sheldon, Rt Hon R.|
|McCartney, Hugh||Shields, Mrs Elizabeth|
|McDonald, Dr Oonagh||Shore, Rt Hon Peter|
|McGuire, Michael||Short, Ms Clare (Ladywood)|
|McKay, Allen (Penistone)||Short, Mrs R.(W'hampt'n NE)|
|McNamara, Kevin||Silkin, Rt Hon J.|
|McTaggart, Robert||Skinner, Dennis|
|McWilliam, John||Smith, C.(Isl'ton S & F'bury)|
|Madden, Max||Smith, Cyril (Rochdale)|
|Mallon, Seamus||Smith, Rt Hon J. (M'ds E)|
|Marek, Dr John||Snape, Peter|
|Marshall, David (Shettleston)||Soley, Clive|
|Martin, Michael||Spearing, Nigel|
|Mason, Rt Hon Roy||Steel, Rt Hon David|
|Maxton, John||Stewart, Rt Hon D. (W Isles)|
|Maynard, Miss Joan||Stott, Roger|
|Meacher, Michael||Strang, Gavin|
|Meadowcroft, Michael||Straw, Jack|
|Michie, William||Thomas, Dafydd (Merioneth)|
|Millan, Rt Hon Bruce||Thomas, Dr R. (Carmarthen)|
|Mitchell, Austin (G't Grimsby)||Thompson, J. (Wansbeck)|
|Morris, Rt Hon A. (W'shawe)||Thorne, Stan (Preston)|
|Morris, Rt Hon J. (Aberavon)||Torney, Tom|
|Oakes, Rt Hon Gordon||Wainwright, R.|
|O'Brien, William||Wardell, Gareth (Gower)|
|O'Neill, Martin||Wareing, Robert|
|Park, George||Weetch, Ken|
|Parry, Robert||Welsh, Michael|
|Patchett, Terry||White, James|
|Pavitt, Laurie||Wigley, Dafydd|
|Pendry, Tom||Williams, Rt Hon A.|
|Pike, Peter||Wilson, Gordon|
|Powell, Raymond (Ogmore)||Winnick, David|
|Radice, Giles||Woodall, Alec|
|Randall, Stuart||Wrigglesworth, Ian|
|Raynsford, Nick||Young, David (Bolton SE)|
|Rees, Rt Hon M. (Leeds S)||Tellers for the Ayes:|
|Richardson, Ms Jo||Mr. Frank Haynes and|
|Roberts, Ernest (Hackney N)||Mr. Don Dixon.|
|Adley, Robert||Bottomley, Mrs Virginia|
|Aitken, Jonathan||Bowden, A. (Brighton K'to'n)|
|Alexander, Richard||Bowden, Gerald (Dulwich)|
|Alison, Rt Hon Michael||Boyson, Dr Rhodes|
|Amess, David||Braine, Rt Hon Sir Bernard|
|Ancram, Michael||Brandon-Bravo, Martin|
|Arnold, Tom||Bright, Graham|
|Ashby, David||Brinton, Tim|
|Aspinwall, Jack||Brittan, Rt Hon Leon|
|Atkins, Rt Hon Sir H.||Brooke, Hon Peter|
|Atkins, Robert (South Ribble)||Brown, M. (Brigg & Cl'thpes)|
|Atkinson, David (B'm'th E)||Browne, John|
|Baker, Rt Hon K. (Mole Vall'y)||Bruinvels, Peter|
|Baker, Nicholas (Dorset N)||Bryan, Sir Paul|
|Baldry, Tony||Buchanan-Smith, Rt Hon A.|
|Banks, Robert (Harrogate)||Buck, Sir Antony|
|Batiste, Spencer||Budgen, Nick|
|Beaumont-Dark, Anthony||Bulmer, Esmond|
|Bellingham, Henry||Burt, Alistair|
|Bendall, Vivian||Butcher, John|
|Benyon, William||Butler, Rt Hon Sir Adam|
|Best, Keith||Butterfill, John|
|Bevan, David Gilroy||Carlisle, John (Luton N)|
|Biffen, Rt Hon John||Carlisle, Kenneth (Lincoln)|
|Biggs-Davison, Sir John||Cash, William|
|Blackburn, John||Chalker, Mrs Lynda|
|Blaker, Rt Hon Sir Peter||Channon, Rt Hon Paul|
|Bonsor, Sir Nicholas||Chapman, Sydney|
|Bottomley, Peter||Chope, Christopher|
|Churchill, W. S.||Heathcoat-Amory, David|
|Clark, Hon A. (Plym'th S'n)||Heddle, John|
|Clark, Dr Michael (Rochford)||Henderson, Barry|
|Clark, Sir W. (Croydon S)||Heseltine, Rt Hon Michael|
|Clarke, Rt Hon K. (Rushcliffe)||Hickmet, Richard|
|Cockeram, Eric||Hicks, Robert|
|Colvin, Michael||Higgins, Rt Hon Terence L.|
|Conway, Derek||Hill, James|
|Coombs, Simon||Hind, Kenneth|
|Cope, John||Hirst, Michael|
|Cormack, Patrick||Hogg, Hon Douglas (Gr'th'm)|
|Corrie, John||Holland, Sir Philip (Gedling)|
|Couchman, James||Holt, Richard|
|Critchley, Julian||Hordern, Sir Peter|
|Crouch, David||Howard, Michael|
|Currie, Mrs Edwina||Howarth, Alan (Stratf'd-on-A)|
|Dickens, Geoffrey||Howarth, Gerald (Cannock)|
|Dicks, Terry||Howell, Rt Hon D. (G'ldford)|
|Dorrell, Stephen||Howell, Ralph (Norfolk, N)|
|Douglas-Hamilton, Lord J.||Hubbard-Miles, Peter|
|Dover, Den||Hunt, David (Wirral W)|
|du Cann, Rt Hon Sir Edward||Hunt, John (Ravensbourne)|
|Dunn, Robert||Hunter, Andrew|
|Durant, Tony||Irving, Charles|
|Edwards, Rt Hon N. (P'broke)||Jackson, Robert|
|Eggar, Tim||Jessel, Toby|
|Emery, Sir Peter||Johnson Smith, Sir Geoffrey|
|Evennett, David||Jones, Gwilym (Cardiff N)|
|Eyre, Sir Reginald||Jones, Robert (Harts W)|
|Fairbairn, Nicholas||Joseph, Rt Hon Sir Keith|
|Fallon, Michael||Kershaw, Sir Anthony|
|Farr, Sir John||Key, Robert|
|Favell, Anthony||King, Roger (B'ham N'field)|
|Fenner, Dame Peggy||Knight, Greg (Derby N)|
|Finsberg, Sir Geoffrey||Knight, Dame Jill (Edgbaston)|
|Fletcher, Sir Alexander||Knowles, Michael|
|Fookes, Miss Janet||Knox, David|
|Forman, Nigel||Lamont, Rt Hon Norman|
|Forsyth, Michael (Stirling)||Lang, Ian|
|Forth, Eric||Lawler, Geoffrey|
|Fox, Sir Marcus||Lawrence, Ivan|
|Franks, Cecil||Lawson, Rt Hon Nigel|
|Fraser, Peter (Angus East)||Lee, John (Pendle)|
|Freeman, Roger||Leigh, Edward (Gainsbor'gh)|
|Fry, Peter||Lennox-Boyd, Hon Mark|
|Gale, Roger||Lester, Jim|
|Galley, Roy||Lewis, Sir Kenneth (Stamf'd)|
|Gardiner, George (Reigate)||Lightbown, David|
|Gardner, Sir Edward (Fylde)||Lilley, Peter|
|Gilmour, Rt Hon Sir Ian||Lloyd, Sir Ian (Havant)|
|Glyn, Dr Alan||Lloyd, Peter (Fareham)|
|Goodhart, Sir Philip||Luce, Rt Hon Richard|
|Goodlad, Alastair||Lyell, Nicholas|
|Gorst, John||McCrindle, Robert|
|Gow, Ian||McCurley, Mrs Anna|
|Gower, Sir Raymond||Macfarlane, Neil|
|Grant, Sir Anthony||MacGregor, Rt Hon John|
|Greenway, Harry||MacKay, Andrew (Berkshire)|
|Gregory, Conal||MacKay, John (Argyll & Bute)|
|Griffiths, Sir Eldon||Maclean, David John|
|Grist, Ian||McLoughlin, Patrick|
|Ground, Patrick||McNair-Wilson, M. (N'bury)|
|Grylls, Michael||McNair-Wilson, P. (New F'st)|
|Gummer, Rt Hon John S||McQuarrie, Albert|
|Hamilton, Hon A. (Epsom)||Madel, David|
|Hamilton, Neil (Tatton)||Major, John|
|Hampson, Dr Keith||Malins, Humfrey|
|Hanley, Jeremy||Malone, Gerald|
|Hannam, John||Maples, John|
|Hargreaves, Kenneth||Marland, Paul|
|Harris, David||Marlow, Antony|
|Harvey, Robert||Marshall, Michael (Arundel)|
|Haselhurst, Alan||Mates, Michael|
|Havers, Rt Hon Sir Michael||Mather, Sir Carol|
|Hawkins, C. (High Peak)||Maude, Hon Francis|
|Hawkins, Sir Paul (N'folk SW)||Mawhinney, Dr Brian|
|Hayes, J.||Maxwell-Hyslop, Robin|
|Hayhoe, Rt Hon Sir Barney||Mayhew, Sir Patrick|
|Hayward, Robert||Mellor, David|
|Heath, Rt Hon Edward||Merchant, Piers|
|Meyer, Sir Anthony||Renton, Tim|
|Miller, Hal (B'grove)||Rhodes James, Robert|
|Mills, Iain (Meriden)||Rhys Williams, Sir Brandon|
|Mills, Sir Peter (West Devon)||Ridley, Rt Hon Nicholas|
|Miscampbell, Norman||Ridsdale, Sir Julian|
|Mitchell, David (Hants NW)||Rifkind, Rt Hon Malcolm|
|Moate, Roger||Rippon, Rt Hon Geoffrey|
|Monro, Sir Hector||Roberts, Wyn (Conwy)|
|Montgomery, Sir Fergus||Robinson, Mark (N'port W)|
|Moore, Rt Hon John||Roe, Mrs Marion|
|Morris, M. (N'hampton S)||Rossi, Sir Hugh|
|Morrison, Hon C. (Devizes)||Rost, Peter|
|Morrison, Hon P. (Chester)||Rowe, Andrew|
|Moynihan, Hon C.||Ryder, Richard|
|Mudd, David||Sackville, Hon Thomas|
|Neale, Gerrard||Sainsbury, Hon Timothy|
|Nelson, Anthony||St. John-Stevas, Rt Hon N.|
|Neubert, Michael||Sayeed, Jonathan|
|Newton, Tony||Shaw, Giles (Pudsey)|
|Nicholls, Patrick||Shaw, Sir Michael (Scarb')|
|Norris, Steven||Shelton, William (Streatham)|
|Onslow, Cranley||Shepherd, Richard (Aldridge)|
|Oppenheim, Phillip||Shersby, Michael|
|Ottaway, Richard||Silvester, Fred|
|Page, Sir John (Harrow W)||Sims, Roger|
|Page, Richard (Herts SW)||Skeet, Sir Trevor|
|Parkinson, Rt Hon Cecil||Smith, Sir Dudley (Warwick)|
|Patten, J. (Oxf W & Abgdn)||Smith, Tim (Beaconsfield)|
|Pattie, Rt Hon Geoffrey||Soames, Hon Nicholas|
|Pawsey, James||Speed, Keith|
|Peacock, Mrs Elizabeth||Speller, Tony|
|Pollock, Alexander||Spencer, Derek|
|Porter, Barry||Spicer, Jim (Dorset W)|
|Portillo, Michael||Spicer, Michael (S Worcs)|
|Powell, William (Corby)||Squire, Robin|
|Powley, John||Stanbrook, Ivor|
|Prentice, Rt Hon Reg||Stanley, Rt Hon John|
|Price, Sir David||Steen, Anthony|
|Prior, Rt Hon James||Stern, Michael|
|Proctor, K. Harvey||Stevens, Lewis (Nuneaton)|
|Pym, Rt Hon Francis||Stewart, Allan (Eastwood)|
|Raffan, Keith||Stewart, Andrew (Sherwood)|
|Raison, Rt Hon Timothy||Stewart, Ian (Hertf'dshire N)|
|Rathbone, Tim||Stokes, John|
|Rees, Rt Hon Peter (Dover)||Stradling Thomas, Sir John|
|Sumberg, David||Walker, Rt Hon P. (W'cester)|
|Tapsell, Sir Peter||Waller, Gary|
|Taylor, John (Solihull)||Walters, Dennis|
|Tebbit, Rt Hon Norman||Ward, John|
|Temple-Morris, Peter||Wardle, C. (Bexhill)|
|Terlezki, Stefan||Warren, Kenneth|
|Thatcher, Rt Hon Mrs M.||Watson, John|
|Thomas, Rt Hon Peter||Watts, John|
|Thompson, Donald (Calder V)||Wells, Bowen (Hertford)|
|Thompson, Patrick (N'ich N)||Wells, Sir John (Maidstone)|
|Thorne, Neil (Ilford S)||Wheeler, John|
|Thornton, Malcolm||Whitfield, John|
|Thurnham, Peter||Whitney, Raymond|
|Townend, John (Bridlington)||Wiggin, Jerry|
|Townsend, Cyril D. (B'heath)||Wilkinson, John|
|Tracey, Richard||Wolfson, Mark|
|Trippier, David||Wood, Timothy|
|Trotter, Neville||Woodcock, Michael|
|Twinn, Dr Ian||Yeo, Tim|
|van Straubenzee, Sir W.||Young, Sir George (Acton)|
|Vaughan, Sir Gerard||Younger, Rt Hon George|
|Waddington, Rt Hon David||Tellers for the Noes:|
|Wakeham, Rt Hon John||Mr. Robert Boscawen and|
|Waldegrave, Hon William||Mr. Tristan Garel-Jones.|
|Walker, Bill (T'side N)|
§ Question accordingly negatived.
§ Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.
§ MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
That this House congratulates Her Majesty's Government on the success of its economic policies which have led to six years of healthy, balanced economic growth, have brought inflation down to its lowest levels for nearly two decades, have enabled industry to become more profitable than at any time since 1964, have brought the fastest productivity growth among major European countries since 1979 and have fostered the conditions in which a million new jobs have been created throughout the country since 1983.