4.53 pm
Mr. Gordon Brown (Dunfermline, East)

I beg to move. That this House condemns Her Majesty's Government for creating and then compounding a recession which has led to large falls in manufacturing output and investment, rapidly rising closures and bankruptcies and the fastest growing unemployment in Western Europe, now hitting all professions, occupations and trades; deplores the problems all businesses, especially small businesses, are facing over high interest rates; regrets, especially in the run-up to 1992, the current contraction of industrial strength in all regions and nations of the country; and calls for an interest rate cut and policies for technology skills and the regions that will build a stronger industrial base throughout the country.

Mr. Speaker

I have selected the amendment in the name of the Prime Minister. In view of the late start to the debate, it will be necessary to impose a 10-minute limit on speeches between 7 and 9 o'clock.

Mr. Brown

This motion draws attention to the urgent need for measures to deal with unemployment, with the crisis in investment, and with the problems of training and skills in our economy.

Today unemployment is nearly 2.25 million men and women, 70,000 higher than last month. That is the biggest May rise since 1945—a higher rise than the previous highest in the United Kingdom, during the last Tory recession in the 1980s. Unemployment is now 600,000 men and women higher than it was at this time last year, having risen relentlessly for 14 months in a row. It is rising faster than in any other country in western Europe; it is rising not merely in the south and the north but in every region of the United Kingdom. It is rising not merely in areas of traditional blue-collar employment but among every profession, trade and occupation, with 80,000 managers now out of work.

Unemployment, the biggest destroyer of opportunity, is now half a million higher than when the current Prime Minister came to power, pledged to a classless society and the hollow promise of opportunity for all. It is half a million higher than when the Prime Minister, when Chief Secretary to the Treasury, told us that families and people in work could plan ahead on the basis of there being an economic miracle.

There has been as fast a rise in the numbers unemployed in a shorter time as under any Prime Minister since the 1930s. The recession is reaching parts of the economy that previous recessions did not reach.

Mr. Michael Brown (Brigg and Cleethorpes)

rose—

Mr. Brown

I shall give way in a minute.

For a year, the Government have boasted that unemployment is below the European average; now, according to the Organisation for Economic Co-operation and Development, unemployment is higher than the European average and is rising faster than anywhere else. By the end of the year, according to the most recent estimates, unemployment will be higher in Britain than in any other European country with the exceptions of Ireland and Greece. What of the human consequences?

Mr. Michael Brown

It is perfectly legitimate for the hon. Gentleman to mention unemployment in the context of this debate, but I wonder whether he recalls that when challenged by Conservative Members during a previous debate on the Labour party's minimum wage policy, he said that if that policy were implemented unemployment would increase a little additionally. Would he care to say by how much unemployment might rise if his minimum wages policy were introduced?

Mr. Brown

The hon. Gentleman should do his research before he comes to the debate. I have never had any statement of the sort attributed to me. It is absolutely clear from looking around Europe, where they all have minimum wages, that that has not affected employment and there is no reason to believe that it would affect it here.

The Secretary of State for Employment has made the issue of the next election very clear. In contrast to Labour's minimum wage proposals, he has said that he wants to abolish wages councils in their entirety. I ask the hon. Member for Brigg and Cleethorpes (Mr. Brown) and his colleagues to defend the existence of more poverty pay in our economy.

Mr. Spencer Batiste (Elmet)

If the hon. Gentleman is not willing to face head on the reality that statutory minimum wage policies will cause increased unemployment, does he share with Gavin Laird the concern that that policy will erode skill differentials and discourage training?

Mr. Brown

No, I do not and I believe that a minimum wage is not only socially just, but makes for economic efficiency. I quote the words of Sir Winston Churchill, when he introduced the first minimum wage proposals into this House in 1908 and said that he wanted to end a situation where the good employer was undercut by the bad and the bad employer undercut by the worst. That is precisely what our minimum wage proposal will do—[Interruption.] That shows that Conservative Members want to return to the position before 1908.

What of the human consequences of unemployment, about which Ministers say so little when talking emptily about opportunity for all? Perhaps the Secretary of State will be more influenced by listening to a manager from a Tory constituency, a Tory voter who was quoted in The Times on 4 June as saying of the Tories: they have devalued my house. They have lost me my job. They have pushed up inflation. They have made unemployment start rising and they do not seem to be taking any notice. They do not realise the resentment there is pent up. It is not the people who make noises, it is the silent voter who is frustrated by what he sees is happening, the mismanagement of the country". It is not merely managers; skilled, conscientious and reliable men in their 50s, who have worked every day for nearly 40 years, are now being made redundant, and are gradually beginning to realise that they will never work again. Their suffering is no doubt part of the price that the Chancellor thinks is well worth paying. Widows, the only breadwinners for their families, are condemned to an indefinite future of unrelieved poverty on the basic dole of£40 a week, or just a little more. No doubt the Chancellor regards their unemployment as a price well worth paying.

Young people are denied the opportunity of doing a first-class job. They have never experienced the self-esteem that can follow a good day's work. No doubt that colossal waste of human potential is also part of the price that the Chancellor considers well worth paying. Then there is the family man with a mortgage who goes home to tell his children that, now that he has lost his job, they will shortly have to lose their home. No doubt that family's suffering is all part of the price that the Chancellor considers well worth paying.

The lives of all those people—if I may use the agonised phrase of the former Prime Minister—have been shattered like patterned glass smashed on the ground. No doubt, however, it is all part of the price that the Chancellor thinks well worth paying. The truth is that the only price in unemployment that the country thinks worth paying is the unemployment of the Chancellor himself.

Mr. Churchill (Davyhulme)

How does the hon. Gentleman imagine that Labour's policies of giving more power back to the union bosses and increasing taxation levels will contribute to the solving of such problems?

Mr. Brown

It is amazing that, on a day when we have heard that unemployment has risen by 70,000, the hon. Gentleman cannot think about the problems of people in his constituency who are losing their jobs, and that he should suggest that the Government's policies are working. The fact is that they are not.

Today, Ministers should tear down the offensive advertisements, mounted at the taxpayer's expense, which read: "I will work, I must work, I can work." Those advertisements attempt to show that it is not the Government but the unemployed who have failed. The Government should erect, at their own expense, a billboard addressing the truth—that Conservative government is not working. It is the Government who have let down the unemployed.

A memorandum from the Department of Employment itself makes it very clear what is happening, and what will happen in the next few months. According to the document, which was produced on 2 May, the forecast for the period October 1990 to October 1991 was for a 50 per cent. rise in the levels of unemployment"— that is, an increase of 850,000 in the number of unemployed men and women in a year. Since October 1990 half a million have become unemployed, and the Government and the Training Agency predict that 350,000 more will do so in the next few months. The memorandum goes on: Any arguments that the Treasury therefore have for a reduction in funding for training are now completely eroded. There is a demonstrable justification for further funds. Ministers should act today, even if they do so not because they fear the unemployment of others as a result of the recession, but because they fear their own unemployment following a general election. Every day on which they delay the training and employment programmes that we propose for the unemployed represents a further betrayal of those whom they have pushed out of work.

Mr. Phillip Oppenheim (Amber Valley)

The tenor of the hon. Gentleman's speech makes it plain that he is concerned about the performance of British business. Will he cast his mind back to an era when British Airways was rated below Aeroflot, British Leyland was the butt of international jokes and British Steel was the world's largest loss-maker? A Labour Government were in power then. How can the hon. Gentleman, who has never manufactured anything except dodgy policies, expect to do any better?

Mr. Brown

As the hon. Gentleman delivers his continual lectures from the Back Benches, he should remember that the growth rate under the last Labour Government was higher than it has been under the present Government. Despite what he says, our share of world trade has fallen under this Government, and fallen severely.

The hon. Gentleman should cast his own mind back —to the manifesto that he wrote in 1987. Unemployment in his constituency is now 61 per cent. higher than it was last year. In 1987, he wrote: The battle for jobs is finally being won. It is not only the old, obsolete, traditional companies that are going under; it is also the new, high-technology companies which were told by the Government that they represented the country's future, but which in recent months have needlessly become part of our industrial past. The Government cannot dismiss the 500,000 unemployed, the 40,000 bankruptcies in a year, the 5 per cent. fall in output and the 20 per cent. fall in manufacturing investment as the froth on the economy or a simple loss of fat from industry. They must admit that those losses go far beyond the natural resilience of the economic cycle, and represent not just a tragedy for individuals and families, but the attrition of our industrial base. They have eroded a critical mass of skills and expertise, and a culture of technology that, once lost, cannot easily—if ever—be restored.

Where is the recovery promised by the Chancellor and others? Last November, in the autumn statement, we were told to trust the Government, because the economy was about to turn the corner. A few months later, we were again urged to trust them, because the economy was about to turn the corner. In November 1990, the Prime Minister told us that the recovery would come "early next year", but the unemployed are still waiting. In his Budget speech, the Chancellor told us that the recession was "largely behind us", and that the recovery would begin around the middle of this year".—[Official Report, 19 March 1991; Vol. 188, c. 165.] Under pressure, the Chancellor told us a week later that the recovery would begin towards the middle of the year. If recovery were indeed beginning towards the middle of the year, would we not be experiencing it now? The unemployed are still waiting.

In April, in a speech to the Institute of Directors, the Chancellor said: we are close to a turning point"— but the unemployed are still waiting. The right hon. Gentleman continued, in even more fevered language, "victory is in sight." A few days ago, when he realised that developments could not be timed as precisely as he had thought, the Chancellor said: "It's not like arriving at Waterloo station. You cannot tell when it will happen"—a remark which betrays a sad lack of familiarity with the realities of life for London commuters.

The Government told us three years ago that a miracle had happened, when it had not. A year ago, they told us that there was no recession, when there was. Can we now believe anything that they say about a recovery? In his last survey, Mr. Banham, from the CBI, said that things were bad and getting worse. The Engineering Employers Federation's last survey told us that prospects would not improve in the short term. According to the motor manufacturers, the recession would continue until the end of the year. Ian Valiance of British Telecom, one of the Government's supporters, has said: there is no sign of an upturn"— except for him, that is— and we do not know when it will come". Mr. Graham Mackenzie, of United Engineering Steels Ltd., said: we were pessimistic six months ago but we never expected anything as bad as this". On Monday, Goldman Sachs said that it was hard to find any company in any part of the economy that was reporting clear signs of improvement in activity. Kleinwort Benson has referred to the almost complete evaporation of confidence over the last few weeks". What are we to make of all the Government's claims about the promised recovery? All that the Chancellor has been able to say, in an extended interview on these matters, is what he said to David Frost a few days ago—that he could detect "vague stirrings" in the economy.

A transcript has now become available. The Chancellor said: There are vague stirrings at the moment, but the signs are there. Business men say 'We cannot see it'"— but the Government, of course, can see around the corner.

David Frost said: But the vague stirrings you are saying you have seen—you say you have seen vague stirrings. The Chancellor replied, Faint stirrings, yes. There are those who claim to see visions; there are those who claim to hear voices; yet others claim to have second sight. Now the Chancellor seeks to persuade us that he can hear, see, feel or otherwise detect "faint stirrings". I am advised by those who know about these matters that, if the symptoms were merely those of seeing things that the rest of us could see and misrepresenting them, the Chancellor would be deemed to be suffering from delusions. Alas, his predicament is more serious: he is seeing things that he knows others cannot see, and living his whole life as if they were there. This is a textbook case of an otherwise sane man hallucinating a whole economic recovery—just as three years ago he hallucinated an economic miracle.

What is to blame for what has gone wrong? Is it consumer spending? Is it the stock exchange crash? Is it inefficient management? Is it the wage rises? Is it the banks? Is it the right hon. Member for Blaby (Mr. Lawson), who is often blamed for creating this mess single-handedly? It is interesting that the answer came to us in an interview not in Vanity Fair or in "Bark", the Japanese journal which enjoys the confidence of at least one faction of the Conservative party.

In a revealing interview nearer home, hidden away in the privately circulated House Magazine, which the Secretary of State for Trade and Industry, presumably hoped few would take the trouble to read, the right hon. Gentleman was asked, "Why the recession? Why inflation?" He said: It rose because of mistakes which were made during the period I was at the Treasury". Mistakes at the Treasury—a significant confession. The right hon. Gentleman continued: so I can't, and wouldn't wish to, escape my share of the blame. There it is—a confession, a complete admission of guilt.

The Minister who is to stand before us today has given us a full and frank account of his part in the affair. He has made a clean breast of it and has avoided the necessity of a prolonged cross-examination during his speech. It is a recession which, we now know, cannot be blamed on the Gulf war, America, the EC, the unions or managers but which, by the right hon. Gentleman's admission, is due to mistakes which were made at the Treasury.

Far more significant than the admirable personal confession of guilt by the Secretary of State—in effect, the right hon. Gentleman turning Queen's evidence; I remind the House that he was only a junior Minister during those events, probably keeping bad company at the time—is his statement of the part played by others. As he puts it, the blame attached to those at the Treasury.

Who are these men whose careers have gone unchecked, who have never been forced by The House Magazine into a confession of guilt and who have inveigled themselves into more senior positions? I refer, of course, to the former Chief Secretary, now Prime Minister, and to the Financial Secretary, now Chancellor, who were jointly and severally responsible. They were to blame, not the managers of our companies, not trade unions, not businesses and not primarily bankers, either. On the admission of the Secretary of State for Trade and Industry, mistakes were made by people at the Treasury—the senior ones now at Downing street.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Lilley)

Does the hon. Gentleman recall that the mistake of cutting interest rates excessively after the crash of October 1987 was endorsed by the shadow Chancellor? Unlike me, the right hon. and learned Gentleman still believes that it would have been right to have interest rates even lower then, while I have recognised that that was not right and that we erred in the direction of resisting a slump. The consequence was greater inflation.

Mr. Brown

That was an interesting statement. The right hon. Gentleman now seeks to tell us that it was a "mistake" and not "mistakes" that were made during the period he was at the Treasury. [HON. MEMBERS: "Answer."] Of course we supported the reduction in interest rates—[HON. MEMBERS: "Oh."] We did not make a mistake. Of course we supported the reduction in interest rates. We did not support the £6 billion in tax cuts, mainly to the very rich, which was the primary reason why things moved ahead after March and caused the problems.

Mr. Lilley

In other words, the hon. Gentleman is saying that I was not mistaken.

Mr. Brown

The right hon. Gentleman was certainly mistaken. Talking about mistakes, the biggest mistake made in that three months was the 1988 Budget, which caused many of the problems with which we must now deal. I asked the Secretary of State for Trade and Industry at the time how he could defend that Budget, on the grounds not only of social justice but of economic efficiency, when the Government pumped £6 billion into the economy and then cut interest rates again. That is why we have all the problems now, and everyone knows it. They are the men who are guilty of creating the recession they once claimed never existed, guilty of compounding it by further actions and, even now, guilty of failing to correct the recession without rapidly rising unemployment and cutting at the heart of our industrial capacity.

What does the Prime Minister now say after all that? The classless society now looks like a hollow promise; opportunities for all look, with rising unemployment, like a sick joke; a nation "at ease with itself"—the comment he took from President Bush and said was applicable to Britain—now looks like a contradiction in terms. What are we now told? At the start of the week, we were told that we would have a keynote speech defining Majorism. The Prime Minister appears to have changed his mind—that in itself is a definition of Majorism. We have had Thatcherism, but of course we never had Churchillism, Macmillanism or Gladstoneism. Apparently, after six months of these achievements, and after all that new thinking, we are to have Majorism. I believe that the nation would excuse the lack of Majorism as a philosophy if we at least had policies to deal with one problem—rising unemployment.

Ten years ago, we were told that the Prime Minister was not for turning but that the economy would turn. Now it seems that things have changed. We have a Prime Minister who does nothing but turn and an economy that will not. What is to happen in this recovery which we were promised? The Government's case is that, after this unfortunate recession, will come sustainable recovery and all our worries will cease—exactly what they told us after the first Tory recession. It is even less credible when we have entered a second Tory recession with unemployment higher than it was in 1979 and industrial capacity smaller.

The real question is, what kind of recovery can we expect? Will it be investment-led growth? Will it he industry-led? Will it be likely to ensure sustainable growth? The Chancellor has already begun to answer the question. When pressed by David Frost, the only stirrings the right hon. Gentleman could detect were not stirrings in industry or manufacturing, not even signs of new investment in industry as a whole, but stirrings in the property or the housing market. Those are precisely the sectors whose expansion without investment-led growth led to the recession in the first place. Indeed, the very sectors in manufacturing industry upon which the country's future most depend for sustainable growth will, by the Chancellor's own admission, be the last to recover.

Is it not the case that the Government recognise that fact and will not tell the nation the full truth? Despite all pleas to the contrary, Britain will do badly in 1991; it will also do badly in 1992, according to the Government's own figures. As we leave the recession, if interest rates arid inflation fall, the real questions will be: how much capacity will have been lost? How much unemployment will there be? How much investment will there be? The question that dominates our future as well as our present deliberations is: how can we have steady, sustainable, long-term growth for Britain without the capacity, particularly the skills, and the strength to sustain it?

Anyone looking at the forecasts that are made in Europe, with the Government's help, will know that investment prospects in Britain are believed to be about the lowest in Europe, not just in 1991 but in 1992. Investment is expected to rise by 4 per cent. in Germany, 6 per cent. in Spain and 4 per cent. in Italy but only just over 2 per cent. in Britain. Having had a worse record for output this year than any other country except Greece, next year Britain will fall to the bottom of the European investment league as well. According to the forecasts, employment is expected to fall in 1991 and 1992. Not only will Britain's export performance be the worst of any EC country this year but, according to the EC's forecasts, the same will happen next year as well.

What will happen to our balance of payments next year? We will have all the elements in 1992 or 1993 of the problems that caused the present recession, including the pressures from imports and the balance of payments which brought rising interest rates and rising inflation. The answer is to be found in the Government's own publication, the Red Book of the Budget. According to the Government's figures, next year imports will rise by 4.5 per cent. The balance of payments, which is in a parlous state this year during a recession, will worsen yet again by £2 billion, according to the Government's estimates, and will have to be financed from abroad through higher interest rates.

Built into the Government's forecasts and into what they are saying in their official publications and buried away in the Red Book are all the elements of future grief in rising imports and a worsening balance of payments deficit. Let us be absolutely clear: there is no long-term strategy from the Government to bring Britain sustainable growth—only a short-term tactic to get them through an election. Even the Government, with their own figures, cannot claim to offer sustainable recovery.

If they do not believe me, will they listen to what industry is saying? The president of the Engineering Employers Federation said: My contention is that the United Kingdom manufacturing sector will simply not be big enough to support the kind of expanding economy that we need in the 1990s Martin Jacomb of Barclays de Zoete Wedd said: It is amazing how long it has taken people to realise the competitive weakness of our economic performance. Even today, our political leaders do not acknowledge it. You still hear them talking as if we were economically successful.

Mr. John Marshall (Hendon, South)

Will the hon. Gentleman give way?

Mr. Brown

No, I shall not give way. I have already done so many times.

If anyone is in any doubt about the gap that must be bridged in the run-up to 1992 and beyond, let him consider the problems that we face not only in training, technology, output and investment as a whole, but in manufacturing investment for the future.

A survey that the Confederation of British Industry gave its members only a few days ago said that manufacturing investment per worker in the United Kingdom is only £2,800; in Germany, it is £4,000; in France, £4,300—60 per cent. higher; in Japan it is more than twice as much—£6,000. Those are the 1989 figures. Investment in other countries has risen and is still rising in most cases, but in Britain it is down to what we estimate to be £2,400 per manufacturing worker. It is falling this year and slipping behind all our competitors as we move forward.

The tragedy is that the loss of investment power for manufacturing workers is not a one-off occurrence that can be dismissed as a freak or a blip—it is a recurring and lasting feature of the past 12 years. Over the past 12 years, the British worker has had only £18,000 invested in him in real terms. The figure for the German worker was nearly 30 per cent. higher, for the French it was 60 per cent. higher and even for the Irish worker it was 50 per cent. higher. In the Netherlands, the figure was 250 per cent. more, and in Canada and America it was 100 per cent. more. No other country invested less in manufacturing per worker except Greece. If the Government will not listen to us, will they listen to the voices from industry?

Mr. Ray Whitney (Wycombe)

Will the hon. Gentleman give way?

Mr. Brown

No.

Under this Government, the whole country now sees 1992 not as the opportunity that it should have been, but as the threat that it has now become.

What of the role of the Department of Trade and Industry? For 12 years, the DTI has done next to nothing. Only a few weeks ago—this is important, because the Secretary of State thought it so in the speeches that he made—after 12 years of doing nothing, the Secretary of State acted and made a few speeches on DTI policy. What was the purpose of those speeches? It was to explain the philosophy behind doing absolutely nothing. I suppose that, having acted and made so many mistakes at the Treasury, by his own acknowledgment, he is playing safe by doing nothing at the DTI.

Under the new Prime Minister, the Department of the Environment is at least getting rid of the poll tax, if not until 1993 or 1994. At least the Department of Health is setting itself new targets even if, it says, they will not make any difference until 1995 or beyond. At least the Department of Transport is talking about investing to get trains to run on time at some as yet unspecified time in the future.

What has happened at the DTI? What does it do when its sphere of responsibility includes dealing with the rundown of research, the failure of investment, the weakening of many of our exports and needs for innovation and the problems of the regions? What is the most important and interesting single initiative of the DTI over the past few weeks? It is not a new policy initiative or programme, but a video. The Sunday Times states: Plummeting morale at the DTI has persuaded the bosses to commission a video to remind staff how vital their work is. The low-key image of Peter Lilley has led some officials to look back with rose tinted spectacles on the reign of Lord Young whose campaigns made DTI staff feel important. The grumblers doubt that the new video will make much difference. Mr. Lilley will star in it himself. Presumably the video will begin, "You may not of heard of me, but I am in charge here."

When industry needs research and development support; when it needs a Department to speak up for them in government and imaginative thinking of public and private partnership to develop the infrastructure; at a time when we need to modernise—as the Labour party proposes—rather than abolish regional policy if we are not to slip back in the run-up to 1992, the best that we have is a video featuring the Secretary of State. The problems of this country are too important to be left to a Government who have failed.

When the House of Lords recommended improved capital allowances to boost investment in manufacturing—as the Labour party has also recommended—and when it recommended in its report tax credits for additional research and development such as those in America—a similar proposal to that advanced by the Labour party —the Government chose to do absolutely nothing. The House of Lords proposed regional development agencies, but we see absolutely no action except cuts in regional incentives, cuts in regional innovation and cuts in the regional technology transfer budget.

Sir Peter Hordern (Horsham)

Perhaps the hon. Gentleman will tell the House what the commitments to tax-free credits for research and development amount to in total. The House would like to know precisely what figures the Labour party has in mind to bolster industry. While he is at it, will he kindly explain why Japanese and American companies prefer to invest more in this country than in the whole of the European Community?

Mr. Brown

That investment will not continue unless we have a decent research and development policy and a decent regional policy. The hon. Member for Horsham (Sir P. Hordern) is a well-known attender of Budget debates. He knows that we set out our proposals clearly during the previous Budget debate. They were set out in the document "Modern Manufacturing Strength" and during every debate that we have had since.

Several Hon. Members

rose—

Mr. Brown

I could take one, two, three or four people, but I do not know which faction of the Conservative party to favour.

When the House of Lords proposed regional development agencies, no action was taken by the do-nothing Department other than to cut regional grants. It is also important that when the Government holds guarantees over British Steel and a golden share, and even after one of the most critical reports by the Select Committee on Trade and Industry, the DTI's response is again to do absolutely nothing. It even refused to debate the issue or to meet me and the shadow Scottish Secretary to discuss it. When the Department was criticised over Rover and British Aerospace and misleading the House and the country by a Select Committee with a Conservative majority, the response was wholly complacent and did not even begin to answer the central charge of deception. Once again, there was nothing from the DTI.

When criticised over secret deals on shipbuilding which prevented investment in profitable capacity in the north-east, the DTI said nothing and refused even to answer the charge. The House of Lords argued that the high incidence of takeovers is damaging to manufacturing industry—as Labour has argued in its policy for stricter takeover laws—but Government policy has been merely to enunciate what is called the Lilley doctrine to prevent state takeovers from abroad and then to water it down almost out of existence in a speech that he made yesterday.

When the most serious takeover threat to British manufacturing in modern history is deemed to be possible, the Government do absolutely nothing and refuse to make clear their views. Would the Government of any other country in western Europe do nothing, if its largest manufacturer and its second largest exporter were at risk? Would it ever come to that in another country, if such a takeover were even contemplated? Why will the Conservative party not make clear its views about the importance of ICI to research and development and to the regions of this country?

If the Government were serious about the needs of industry, about competition policy or about the regions, they would tell us now that they will introduce legislation In the next Session of Parliament—if they go beyond October—to deal with cartels, to set up the regional development agencies that the country needs and that, instead of the privatisation of the Export Credits Guarantee Department and the British Technology Group, we shall have policies for training, technology and innovation.

What about small businesses? Is the Secretary of State for Trade and Industry aware that business debts, small and large, ran at £30 billion last year and that interest repayments were four times higher than in 1979? Is he also aware that £30 billion went in interest payments because of high interest rates, but that only £14 billion was spent on manufacturing investment? Is he aware that interest payments are now a far greater share of companies' out lay than their total investment? Is he aware that because of that and because of the margins charged by the banks, there were 10,000 small business failures in 1980, which was bad enough, but that there were 25,000 last year—500 a week. In 1991, they are now estimated to be anything between 40,000 and 50,000, yet on this, as on every other issue, the Secretary of State does absolutely nothing.

The Government cannot act on Europe because they are divided. They cannot act on training, unemployment, the public services or industry because they are caught between the Thatcherite ideology that they all support and the reality that the public will not go along with it. They are frozen into inaction and scared of further divisions within the party.

The result is that, while the French Prime Minister, who took office only a few days ago, could say that, starting on her first day in office, her biggest priority was to build and to prepare French industry properly for 1992, when our Prime Minister took office on the steps of Downing street in November, he did not say that his aim was to rebuild British industry or the British economy, but merely to reunite a divided Conservative party.

There is urgency in the measures that we are proposing today for investment, training and employment because the summer and autumn will be make or break months for decisions which, if avoided or badly made, will blight our economy for a decade. Having dithered over our preparations for 1992; having drifted into recession and failed to prevent the calamitous collapse of industrial investment; having failed to act decisively over the skills programme, over training for the unemployed, over the industrial investment incentive and over the technology trusts, all of which we have proposed; having failed to act decisively over the regional development agencies that we believe are necessary, not just in the regional interest but in the national interest; and having been caught unawares as our industrial capacity has shrunk, while our competitors have moved ahead, there is little time left for Britain in the run-up to 1992.

Faced with the deadline of 1992, any other Government—

Mr. Lilley

Will the hon. Gentleman confirm that, whatever the impression he is trying to give, he cannot offer or commit himself to a single extra penny of expenditure because industry does not feature as one of the Labour party's two top priorities, and that any extra expenditure, at which he might be hinting in the remarks that he has finally got round to making, can therefore be made only when growth provides the money?

Mr. Brown

I know that the right hon. Gentleman has to intervene on this point, but he should have listened to the Budget debates and to the Labour party's own debate during Budget week, when I set out the Labour party's proposals on training, investment, skills and action on unemployment. We made our spending commitments absolutely clear in that Budget statement, just as we made them clear with the publication of "Modern Manufacturing Strength".

Any other Government, faced with the deadline of 1992 and pressed for decisions, would do more than adopt the "nothing" approach of the Department of Trade and Industry. Having created a recession, compounded it by further mistakes and having failed to correct it without a cut in industrial capacity, Ministers have failed, failed and failed again. They have nothing to offer the country except their resignations.

5.32 pm
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Lilley)

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 its determination to defeat inflation and on the increasing success of that policy; recognises that industry's first priority is the defeat of inflation so that growth can be resumed; welcomes the transformation of the British economy over the last 12 years; rejects the pro-inflationary policies of the Opposition who would increase public spending and borrowing, provoke a pay explosion and take risks with the exchange rate; and condemns their anti-industry policies of nationalisation, intervention and punitive taxation which would threaten the Government's remarkable achievement.'. Listening to that customary gloom-laden speech from the hon. Member for Dunfermline, East (Mr. Brown), I could not help recalling that splendid old radio programme "Take It From Here", which featured a family called "The Glums". If the BBC ever revive that programme—I hope that it will—the hon. Gentleman is a shoe-in for the part of Ron Glum. He is not merely glum; he is mired in gloom; he positively radiates gloom. He can brighten a room just by leaving it. His speech was long on gloom, but short on policies. He spoke for 30 minutes before even mentioning any Labour party policies. There is a simple reason for that—it is because the Labour party has no strategy on inflation, no strategy for the recession and no strategy on unemployment.

Mr. Gordon Brown

rose—

Mr. Lilley

The Labour party keeps its policies out of sight because it is ashamed of them and because it knows that those policies would make every one of those problems worse.

Mr. Brown

rose—

Mr. Lilley

Labour's policies would raise inflation, deepen recession, and increase unemployment—[HON. MEMBERS: "Give way."] The hon. Member for Dunfermline, East will be able to intervene in a moment. he spoke for 35 minutes without telling us about any of his policies.

Mr. Brown

I am grateful to the right hon. Gentleman for finally giving way.

Is not the right hon. Gentleman gloomy about unemployment at the moment? Can he tell us whether his Government now irrevocably rule out Labour's proposed training and employment programme that is designed to reduce unemployment? If he is doing that, he is abandoning and betraying the unemployed.

Mr. Lilley

What a pathetic intervention. The hon. Gentleman knows that that point, which he did not raise in his speech, was dealt with adequately last night by my right hon. and learned Friend the Secretary of State for Employment.

Mr. Gordon Brown

The House deserves a direct answer to a question which, incidentally, I asked in my speech, although the right hon. Gentleman did not seem to hear it. Are the Government now ruling out a training and employment programme to reduce the rate of unemployment? Are they ruling out an emergency programme, which we believe to be in the national interest and an essential matter of policy?

Mr. Lilley

The hon. Gentleman knows that that point was dealt with perfectly well last night by my right hon. and learned Friend the Secretary of State for Employment. The hon. Gentleman wants to conceal the fact that, as I have said, the Labour party does not have any policies on the recession, inflation or unemployment.

The Labour party does not have a strategy for inflation, because it does not recognise its importance; it does not have the faintest understanding of its cause and does not have a clue about how to cure it. Conservative Members know that success in dealing with inflation is a precondition for everything else. That is why getting inflation down is our top priority. Even businesses that are experiencing the pain of recession agree with us about that. The good news is that inflation is coming down—we are winning that battle. Inflation is already down 4.5 per cent. from its peak and is below the lowest level that was ever achieved by the last Labour Government. Inflation is on track for 4 per cent. by the end of the year, which is half the lowest level that was ever achieved by the Labour Government.

Ms. Hilary Armstrong (Durham, North-West)

What about the underlying rate?

Mr. Lilley

The underlying rate of inflation, about which the hon. Lady is asking, is also heading downwards, as yesterday's producer prices index of 6 per cent. confirms. What is more, both the Confederation of British Industry and the journal of the Bank of England think that that index is too pessimistic about our success in reducing the underlying rate of inflation, because many firms seem to report their list prices—[Interruption.]—without taking into full account the discounts that they are giving, as they are requested to do. [Interruption.]

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I apologise for interrupting the Secretary of State, but our debate is not helped by excessive sedentary shouting from both sides of the House. I hope that we can have some self-restraint.

Mr. Lilley

Conservative Members understand that Labour Members do not want to hear their lack of policies being exposed.

As well as believing that the rate of underlying inflation is declining more rapidly than the official index suggests, the CBI also states that 19 per cent. of the firms in its survey have reduced their net prices over the past four months. I am sure that the hon. Member for Dunfermline, East would prefer those figures to be more pessimistic but, alas for him, there is more good news. Pay costs are also slowing down. That process is best encouraged where top management sets an example. Throughout industry as a whole, pay settlements are 2.25 percentage points below their peak. The CBI's figures show that one in five companies is deferring any pay increase for the time being. If the hon. Member for Dunfermline, East could pay some attention to the debate, perhaps he will tell the House whether he is prepared to welcome that moderation in pay settlements—I shall give way to him if he wishes me to do so—or is he so afraid of his trade union masters that he will not welcome pay moderation?

The fact is that the Labour party does not have any policies to bring inflation down, but it has plenty that would put it up. A Labour Government would increase public borrowing, as they always do, which would raise inflation—

Mr. Austin Mitchell (Great Grimsby)

rose—

Mr. Lilley

I shall give way to the hon. Gentleman in a moment.

A Labour Government would increase public spending, as they always do, which would raise inflation. They would spark off a public-sector pay explosion, as they always do, which would increase inflation. They would push up wages everywhere through their statutory minimum wage. That would certainly increase inflation. They would cut interest rates prematurely. That would increase inflation. Let us face it, they would devalue the pound. All Labour Governments have devalued the pound. The Labour party is the party of devaluation, and the hon. Member for Great Grimsby (Mr. Mitchell) advocates that course.

Mr. Austin Mitchell

The Secretary of State is telling us all about inflation. Any fool can bring down inflation and this Government almost certainly will, because it is always slow in graveyards. However, when the Government have brought inflation down to the lowest possible figure and they have a graveyard, where will the locomotive for growth come from? What will produce the return to growth?

Mr. Lilley

The hon. Gentleman simply does not realise that bringing inflation down is the precondition for a return to growth. As we bring inflation down and interest rates fall, lower inflation itself gives a stimulus to the economy and both together cause a resumption of growth.

One City firm recently said that because everyone recognises that the Labour party is prone to devalue, a Labour Government would have to keep interest rates at anything up to 30 per cent. to hold the pound within its exchange rate mechanism limits. All these Labour policies would take us back to the funny money of the 1970s in fairly short order.

Mr. Richard Tracey (Surbiton)

The point that my right hon. Friend has omitted so far and of which all the country is aware is that a Labour Government would increase taxation. Will my right hon. Friend speculate? The hon. Member for Derby, South (Mrs. Beckett) has said that one in 20 people would pay more in tax. The Leader of the Opposition has said that one in 18 people would pay more in tax. The right hon. and learned Member for Monklands, East (Mr. Smith) has said that one in eight people would pay more in tax. Which one does my right hon. Friend think is telling the truth? Or are they incapable of doing so?

Mr. Lilley

Frankly, I do not believe any of them. If one looks at their voting record, one finds that those hon. Members voted against every cut in the basic rate of taxation which brought the rate down from 33p to 25p in the pound. I judge them by their voting record, not by their attempts to excuse and argue their way out of the consequences of their high-spending policies.

It is extraordinary that, having chosen to debate the recession, the hon. Member for Dumfermline, East has as yet offered us no insight into how the Labour party would deal with it. He described it, revelled in it and gloated over it, yet we heard not one whit about what he would do about it. It is his politics of gloom once again, without a single ray of policy to illuminate us.

The hon. Gentleman's calls for further interest rate cuts, when he makes them, are totally discredited by the admission of his right hon. and learned Friend the Member for Monklands, East (Mr. Smith), the Shadow Chancellor of the Exchequer, that, throughout his entire time as Shadow Chancellor, he has advocated a 1 per cent. cut in interest rates. He maintained that call even when interest rates were at their lowest point in 1988. As the hon. Member for Dumfermline, East pointed out, I and the Government as a whole have acknowledged, with the benefit of hindsight, that it was not necessary to cut interest rates following the October 1987 crash. But the shadow Chancellor still says that we cut them too little. He demonstrates his unworthiness to be Shadow Chancellor because he does not understand the connection between interest rates and the economy. If we had followed his advice, then or ever since, inflation would have gone higher and the recession would have been more severe.

There is no doubt on the Government side of the House that Labour's policies would aggravate even further the problems that we face. A recent range of stockbrokers' analyses of the likely impact of Labour's policies agreed that a Labour Government would mean a loss of confidence, higher interest rates, more inflation and an increase in the cost of equity capital for investment.

Mr. Giles Radice (Durham, North)

I wonder whether the right hon. Gentleman thinks that the best way out of the recession is by way of expanding the property market, as the Chancellor seems to suggest.

Mr. Lilley

That is a facile and silly point. My right hon. Friend the Chancellor said no such thing. The economy will resume growth in the second half of this year as a result of our success in getting inflation down.

Labour's whole growth strategy—if the phrase is not a self-contradiction—has a fatal flaw right at its heart. All its policies to boost growth require a great deal of extra public spending. They require more spending on training, more on science, more on innovation and more on the regions. But their own rule—Beckett's law—tells us that, apart from pensions and child benefits, everything must wait "until resources allow". Note the logic—the Labour party will boost growth by spending more, but the spending must wait until growth has been boosted. The argument deserves to be more famous than it is, but in a sense it is pretty famous already. In every textbook of logic, it is called circulus in probando.

Mr. Terry Dicks (Hayes and Harlington)

Will my right hon. Friend not forget to make the point that, if the Labour party was allowed to spend the £30 billion of additional money that it wants to spend, there would be an increase in income tax of 15p in the pound?

Mr. Lilley

My hon. Friend is right. That is why the Labour party tries desperately to cover over the consequences of its spending plans for its tax obligations and why Labour Members gave the confused, misleading and self-contradictory answers to which my right hon. Friend the Member for Surbiton (Mr. Tracey) referred.

Perhaps I have been a little harsh on the Labour party so far. I believe half of its argument. I believe the part about spending. I believe that it would spend more on the multitude of priorities which its Shadow Chief Secretary to the Treasury denies. I believe that it would spend more even on industry because it would spend more on subsidies. It would spend more on quangos. None of that is hard to believe, because it has done it all before. The part that I do not believe about the Labour party's strategy is the growth.

Far from generating growth, the Labour party's spending would cripple the economy. That spending could come only from higher taxation, to which it is already committed, and higher borrowing, at which it hints. In both cases the increase to which it admits is but a fraction, a small fraction, of what its announced promises add up to.

The hon. Member for Great Grimsby wrote in April's New Statesman and Society—it does not have a large Tory readership: To fulfil Labour's proposals we would now need substantially higher borrowing and bigger tax increases. Absolutely right. In the "On the Record" programme last month, the hon. Member for Blackburn (Mr. Straw) said: In an ideal world we would like to say, yes … we'd increase taxation. When interpreted that means, "We know that tax increases are unpopular, so we will not admit to them until after the election".

Mr. Bruce Grocott (The Wrekin)

As the Secretary of State is in the process of quoting lots of radio programmes, would he like to confirm his complete agreement with the Leader of the House who, in a recent radio programme, pointed out that taxation had clearly risen for the average family under this Government?

Mr. Lilley

It is strange then, that the hon. Gentleman voted against every reduction in tax rates that we made.

The part of Labour's policies in which I believe is that there would be some sort of growth as a result of its policies. It would be a growth in taxes and in borrowing. That would consume the resources that industry needs in order to expand and prosper. One thing that I would have thought that the Labour party might have learnt from the 1980s is that, when income and corporation tax rates are reduced, one is more likely to see growth than when they are increased.

We reduced tax rates in the 1980s and saw growth in Britain, for the first peacetime decade this century, exceed that in Germany or France. That was the same decade which saw not only lower tax rates but privatisation, huge reductions in subsidies, less intervention and a pruning of quangos. My colleagues will understand my lack of optimism about Labour's formula: higher taxes, nationalism, increases in subsidies, more intervention and a record number of quangos.

The hon. Member for Dunfermline, East asked me again today to comment upon the Hanson-ICI issue, but he should know better than that. There has been no bid and no Secretary of State could conceivably comment on a hypothetical merger. If I did, and a bid subsequently emerged that called for action by the United Kingdom authorities, the courts might rule that I had "fettered my discretion". In any case, like it or not, any bid where the combined turnover exceeds 5 billion ecu is outside British jurisdiction. It would fall to be considered by the European Commission.

It is hypocritical of a party that is now committed to giving away our power to govern ourselves in monetary, economic and social matters to get hot under the collar about our loss of sovereignty on merger policy. The hon. Member for Dunfermline, East has made a lot of noise recently about the threatened possible takeover of ICI, but he has said nothing about the biggest takeover threat facing British industry—the takeover threatened by Labour's renationalisation plans.

Nationalisation is the N-word which the Labour party dare not mention. It is the policy that dare not speak its name. If the hon. Member for Dunfermline, East and his colleagues are reluctant to speak about it, I shall speak about it for them. The hon. Gentleman's specific documented pledges would involve the Labour party taking over companies worth three times as much as ICI, which invest four times as much a year and which employ five times as many people. Now that is some takeover threat.

Today the hon. Member for Dunfermline, East sneered at our policy of referring to the Mergers and Monopolies Commission where foreign state companies try to take over British firms. It seems that the Labour party is still so obsessed by nationalisation that it would prefer British companies to be owned by foreign Governments than to be owned by British private enterprise.

Mr. Frank Cook (Stockton, North)

On foreign state companies, would the right hon. Gentleman care to comment on the arrangement between ICI and Kemira, a state-owned Finnish company? That arrangement would not only have transferred ownership of the fertiliser section of ICI to Kemira, but would have preserved many hundreds of jobs in my constituency and those of Cleveland, Bristol and Edinburgh, Leith. The preoccupation with nationalisation and national ownership is an obsession in the mind of the Secretary of State rather than in that of anyone else. Was not that the reason for blocking that arrangement which had already been agreed upon?

Mr. Lilley

The MMC recommended that the deal be forbidden and I accepted its advice as has been the practice of every Secretary of State since time immemorial. No guarantee was given that jobs would be preserved had the MMC recommendation not been accepted.

Mr. Richard Holt (Langbaurgh)

My right hon. Friend will be aware of my concern that Britain's only potash mine has been put at risk as a consequence of his decision on the Kemira deal with ICI. At some stage or other, Ministers should stop hiding behind the fact that civil servants, quangos or anyone else make the recommendation. They are in the job to make such a decision, and there are occasions—even if it means that foreign firms have an interest in a British Company—when British national interest should be uppermost in the Secretary of State's mind.

Mr. Lilley

All those points were taken into consideration by the MMC report that I considered. I accepted its judgment that the arrangement was against overall British national interest. Such acceptance has been the practice of Secretaries of State for at least a decade.

From time to time, the hon. Member for Dunfermline, East criticises the Government for what he calls their "hands-off" attitude to industry. By contrast, he would operate a hands-on policy, but so did the Boston strangler —by and large Labour Government policies have had rather similar effects, as they have throttled industry. That desire to intervene is not just a passion of the hon. Gentleman as the shadow Chancellor—normally a hands-offish type—recently declared his belief that Intervention by Government can make a significant contribution to improved efficiency and productivity Yet look at the shadow team who want to get their hands on British industry. They are not all here today, but there are seven of them to match four of us—quantity against quality. Not one of them has ever sullied his hands with a day's work in British industry during their adult lives. If I am wrong, I shall happily give way to any of the Opposition Front-Bench team who want to tell the House of their experience, which will enable them to improve, as the shadow Chancellor said, the efficiency and productivity of industry through intervention. Can any of them tell us what experience they have gained in industry which will enable them to do that? [HON. MEMBERS: "Come on."] Normally the hon. Member for Dunfermline, East is jumping up and down like a jack-in-the-box. Normally he is hyperactive. There must be some truth in what a journalist told me—he works only when he is plugged into a fax machine.

Mr. David Clelland (Tyne Bridge)

I have had some experience in industry. Is the Secretary of State aware that the machine tool industry is the barometer of the manufacturing industry, if not the economy? A few hours ago, a number of my hon. Friends and I met senior directors of the Machine Tool Industry Association. They are extremely concerned about the present recession and the state of the manufacturing industry. They say that, if present policies continue—we must assume that they would if the country were unfortunate enough to be inflicted once again with a Conservative Government—the deficit in manufacturing investment would be £15 billion a year by the year 2000. They believe that, if the current recession continued for more than six months we should have no machine tool industry in the country.

Mr. Lilley

I understand the concerns that the hon. Gentleman articulates. His experience gives him much more right to be on the Opposition Front Bench than that of its present incumbents. It is not just I who think that, because, last week, The Sunday Times hit the nail on the head in its leader: If Mr. Brown was at the industry department we would be back to the days when politicians thought they knew more about the running of business than managers or shareholders, even though most politicians have never run anything (in Mr. Brown's case the most he seems to have run is Edinburgh students' council). The Opposition Front-Bench spokesmen's ignorance of business means that they just do not understand what makes industry tick. If they had any understanding of business they certainly would not be proposing to create a multitude of new quangos and regulations. The one lesson they have learnt is not to talk too often in public about their policies. If they will not, I will.

Just from reading "Modern Manufacturing Strength". Labour's latest policy document on industry, I have found seven new varieties of quango. We have the national investment bank—in other words, a state-run bank—regional development agencies in England, British Technology Enterprise, a defence diversification agency, a new national training agency, technology trusts and, the final irony, a new network of small business advice services to help firms with the bewildering multiplicity of overlapping openings The majority of those quangos will have to borrow on the credit of the British Government and spend what is, in effect, our money.

Quangos are not the only extra burdens that the Labour party is planning to impose on business which were not mentioned by the hon. Member for Dunfermline, East. It will introduce a new jobs tax of 0.5 per cent. on the payroll of companies whose training effort does not meet the Labour party's approval. That will kill off another 50,000 jobs. The Labour party plans to implement in its entirety the European Commission's social action programme, which has been condemned by every major employers organisation in Britain. That would add £3.5 billion to industry's costs and destroy another 100,000 jobs. In addition, there will be thousands, more forms for businesses to fill in because Labour is proposing "social audits" for firms to ensure that social as well as economic costs of decisions … are properly identified".

The Labour party also intends to introduce a new sex equality Act that will require businesses to produce an annual company equalities report. New obligations will be put on companies to make them give employees time off to engage in trade union activity. As well as that, the Labour party will introduce a new entitlement to 10 days paternity leave. One thing is certain. Under Labour, hundreds of thousands more people will be taking time off, and permanently. The truth is that Labour's industrial policies are a job destruction programme on a mammoth scale.

The hon. Gentleman wept salt tears over today's unemployment figures, but he gave no policies for reducing unemployment, and small wonder. His party's main policy plank—the statutory minimum wage—is about the most effective way imaginable to destroy jobs. That is not just my view. The only evidence that the hon. Gentleman could find in its favour came from 1908, from a person who was not even an economist, distinguished though he was as a Liberal of those days. Not only is it not just my view: it was the view of the last but one Labour Government, who published a report entitled "A National Minimum Wage," which concluded: the greater the cost of the national minimum, the greater the consequent adjustment in the level of employment is likely to be. If the House wants something more up to date—though still from the same party—the hon. Member for Birkenhead (Mr. Field) said: The employment consequences of a minimum wage would be little short of disastrous.

Mr. Austin Mitchell

The right hon. Gentleman is indulging in the most abominable kind of nit-picking, at a time when unemployment has risen by 3,200 people per working day since the present Prime Minister took office. We are losing 4,000 jobs a week in manufacturing industry and it is forecast that 40,000 firms will go bust this year, yet all the Minister can do is nitpick. When do the Government intend to bring unemployment down?

Mr. Lilley

If the hon. Gentleman is concerned about unemployment, why does he give his allegiance to a policy which, in the view of even his hon. Friends, will increase unemployment by hundreds of thousands? For example, the Fabian Society, part of his party, recently provided the helpful estimate that up to 880,000 jobs could be destroyed by Labour's minimum wage plan.

Even the National Institute of Economic and Social Research—not normally well disposed to the present Government—estimated recently that a statutory minimum wage could raise the price level by 3.5 per cent. at the end of three years, while reducing the level of GDP by 0.5 per cent., with all the employment consequences that would follow.

Mr. Robert B. Jones (Hertfordshire, West)

Will my right hon. Friend confirm that in addition to a minimum wage causing such additional unemployment, it would hit hardest those with most difficulty in the job market, namely, the disabled, ethnic minorities and women?

Mr. Lilley

My hon. Friend is absolutely right. It would, at the same time, destroy the incentives of people to improve their skills. Opposition Members seem to be getting rattled by criticism coming from within their own ranks on this subject. Recently, the Leader of the Opposition attempted to refute them by claiming that the OECD had concluded that the effect of the minimum wage in France had been in plain language, no job losses. The hon. Member for Sedgefield (Mr. Blair) wrote to the Financial Times yesterday in similar vein, claiming: The most recent study by the OECD into France found no unemployment impact through introducing a minimum wage. The OECD actually said: indications are that the increase in the relative value of the SMIC"— the French minimum wage— in the 1980s is likely to have reduced employment levels, especially for youths and the unskilled. The language of the Leader of the Opposition may be plain, but in this case he is plain wrong.

This week, the Leader of the Opposition, who has been very active, relaunched Labour's science and innovation policy for the umpteenth time. It appeared in a document entitled "Pushing Back the Frontiers"—an apt title. It pushes them all the way back to Harold Wilson and the white heat of technology.

Mr. Barry Field (Isle of Wight)

Does my right hon. Friend recall that Harold Wilson promised the nation the white heat of technology and we ended up with the selective employment tax, which put thousands out of work?

Mr. Lilley

Absolutely. He applied all the policies to which the Labour party is now reverting, although the document that Labour published this week is almost devoid of concrete policies. Instead, Labour sets a target, and the document says: Labour believes a reasonable target is to increase civil research and development from the present 1.8 per cent. of GDP to 2.5 per cent. Table 2 of the document says that that would involve increasing spending on research and development by £5.8 billion. That is some target. As the hon. Member for Livingston (Mr. Cook) said recently, unhelpfully from Labour's point of view: Anyone can invent targets, but targets won't hit themselves. The challenge is what action the Government will take to meet those targets. Unfortunately, the document does not spell out what action a Labour Government would take to meet the target. If Labour proposes to do so by increased Government spending on research and development, that will represent a massive breach of Beckett's law. If not, it must be relying entirely on the only specific proposal in the document, and that is Labour's discredited idea of tax credits for incremental research and development.

I am amazed that Labour Members are still plugging that idea. All the international studies of such tax incentives show how ineffective and wasteful they are. An Inland Revenue study carried out with the help of the OECD reached three conclusions. The first was that countries which operated the biggest tax incentives for research and development had the lowest level of industry-financed research and development. The second was: the best evidence available suggests that special fiscal incentives only increase industrial research and development by an amount that is roughly half of the revenue forgone by the government: the remainder goes to swell companies' cashflow and post-tax profits. The third was that much of the consequence of such incentives was simply to enable accountants to reclassify expenditure that was going on anyway as research and development. The study concluded: in some instances, evidence of abuse (amounting to criminal fraud) has led to the discontinuation … of fiscal incentive measures. So if Labour is relying on tax credits to reach its extra £5.8 billion target, it must be willing to forgo, say, double that in tax revenues, while giving accountants and fraudsters a field day.

Of course, what really makes companies invest in research and development is the spur of competition and the lure of profit. In the last six years, when profits increased substantially, industry raised its spending on research and development by about 50 per cent. in real terms.

On Monday of this week we published—or The Independent newspaper published on our behalf—a research and development scoreboard. That was widely welcomed, and I hope that it will give industry more of a stimulus and the financial world more of an understanding of the importance of research and development.

I have today drawn up another scoreboard. This one compares the performance of the Conservatives with that of the Socialists over our entire periods in office. We are proud of our record, even if Labour Members are ashamed of theirs, and if they insist on going back to the policies that they practised during the last Labour Government, it is legitimate for us to compare the performance of that Labour Government with our performance.

I concede that Labour wins in some categories. I start with inflation, and I must admit that on that one they are high scorers. Prices rose more than twice as fast under Labour as they have risen under Conservative rule. Labour also comes out top in days lost through strikes. They averaged 14.6 million a year between 1974 and 1979, twice the average over our period in office, and in the last 12 months, the number of days lost has fallen t