Address in Reply to Her Majesty's Most Gracious Speech

The Secretary of State for Employment (Lord Young of Graffham)

My Lords, before I begin my speech on the main Motion it may be helpful to the House if I explain how it is intended to handle the debate this afternoon. At the conclusion of my speech the noble Lord, Lord Bruce of Donington, will move his amendment and a debate will follow which, although technically on the first amendment, will cover both. I understand that the noble Lord, Lord Diamond, will speak to his amendment during the debate. When the noble Lord, Lord Bruce, has replied to this debate his amendment will be disposed of, and the noble Lord, Lord Diamond, is expected to move his amendment formally as it will already have been debated.

I should like to support my noble friends Lord Mowbray and Stourton and Lord Arran on their Motion for a humble Address and to congratulate them on the speeches with which they opened these debates last week. I am looking forward to the maiden speech of my noble friend Lord Derwent during the debate.

This debate gives us a chance to review the broad sweep of change in our economy and the strategy of the Government, for consistency of purpose has been the hallmark of this Government's strategy and economic success has been the reward. But what a contrast to the past. In the debate on the Address 10 years ago the government of the day were unable to give this House a clear picture of their strategy. Why? It was simply because they had not yet agreed their policy with the International Monetary Fund.

How our world has changed in just 10 short years. Live for today, change tomorrow, was the hallmark of that previous Labour Government. They lost sight of the fact that social progress can only be built on economic success. The contrast with the strategy of 235 this Government and the economic success we have achieved could not be more marked, for today we have an economy in its sixth successive year of sustained growth producing more than at any time in our long history.

We have an economy with low inflation, at levels not seen for nearly 20 years; we have an economy with high investment up by 4½per cent. a year since 1983 and once again at an all time high; and we have an economy with the basic ingredients for economic success—balanced growth, a healthy rate of profit, good productivity growth, lower company taxation and fewer strikes than at any time for the last 50 years.

Now let us compare our economic record with that of the last Labour Government. It is true that they were better at raising inflation and worse at investment. They were far better at creating strikes and far worse at productivity growth; and the pay-off in living standards was considerable. Between 1974 and 1979 the real take-home pay of a married man with two children on average earnings increased by only one half of 1 per cent, and since 1979 the real take-home pay for the same married man with two children has increased by over 17 per cent., nearly 35 times the growth.

Let us not just make comparisons with the past but let us consider other countries. Let us take inflation. Over the whole period since 1979 inflation has moved in line with the average for the European Community, but recently it has been lower. From 1974 to 1979 inflation in the United Kingdom was much higher than the European Community average—15½per cent. compared to 11 per cent. Let us take growth, since 1980 output has risen faster in the United Kingdom than in France and Germany. Between 1973 and 1979 once again it was growing far more slowly.

Finally, let us take productivity. The latest figures available show once again that between 1979 and 1985 productivity in manufacturing in the United Kingdom rose by 24 per cent., while it went up by 17 per cent. in both France and Germany. Yet if we look back again between 1973 and 1979, during those six glorious years productivity went up by 4 per cent. in the United Kingdom, by 20 per cent. in Germany and by 26 per cent. in France. Those figures alone are, I believe, a sufficient answer to the amendment put down by the noble Lord, Lord Diamond, this afternoon.

All these statistics show how the economy of this country has been immeasurably better under the economic strategy of this Government. But when we look at the whole picture, the brightness of this economic success has been obscured by the shadow of unemployment. It is a shadow which blights the lives of those who have been unemployed for a long period of time. When we look at the simple—and complex at the same time—problem of unemployment we must recognise that the underlying level of unemployment in our country has been rising for decades. It doubled in the 1970s and has doubled again in the 1980s.

But unemployment is not a peculiar scourge of the United Kingdom; it is a European disease rising substantially in all the major countries in recent years, and the United Kingdom economy started from a base 236 which was far weaker than that of our European rivals and more vulnerable to the onset of the world recession which had occurred in the end of the 1970s.

Even so, unemployment is still far too high, and remains our most important challenge ahead. Yet there are signs of improvement. Unemployment has stopped rising. We have had the largest three-month fall in unemployment since 1973. At the same time vacancies have been rising for month after month for the last nine months in a row and are now at their highest level this decade. The upward trend in long-term unemployment will reverse. Unemployment among young people is falling and now unemployment among those under 25 is lower in the United Kingdom than the average in the European Community. As two-year YTS gets fully into its stride the situation will get better still.

But we have to look at all this in perspective. What recipe do noble Lords opposite and their party offer to tackle unemployment? What are the "adequate measures" that the noble Lord, Lord Bruce of Donington, refers to in his amendment? They offer higher demand, ignoring the fact that in the 1970s money GDP quadrupled but real GDP rose by no more than 25 per cent. The real task is to improve the efficiency of the engines of the economy, not simply to pour in more fuel to stoke the fires of inflation. They offer much higher public spending, ignoring the effect on either taxation or interest rates. The figures have been rehearsed sufficient times and all I can say is that if their promises of spending were brought into effect they would have to raise the basic rate of income tax to 53p in the pound; alternatively, and no better, a rate of VAT at 43 per cent. But finally, and with much more difficulty, they promise to cut unemployment by 1 million over two years.

Total employment has been rising for 13 consecutive quarters and has provided 1 million extra jobs and given us the longest period of continuous growth in jobs for almost 30 years. Yet during these 13 successive quarters there has been rising unemployment. During that period when we have seen 1 million new jobs come into being, unemployment has increased by 300,000. So in order to reduce the level of unemployment by 1 million, since the spring of 1983 we would have needed to create 2÷.3 million new jobs. I ask the noble Lord, Lord Bruce of Donington: is that what Labour is promising and, if it is, how do they intend to do it? They intend to create jobs through higher spending on infrastructure, social services, on encouraging employers to give jobs to the long-term unemployed; and indeed I believe they have already written to local councils so that they can set up their plans for spending more.

Within our overall spending strategy we are already prepared to increase spending on individual projects if the rate of return is good, but that is an entirely different matter from creating non jobs by indiscriminate recruitment to the public sector. Creating such non jobs will simply reduce the efficiency of the public sector and once again harm the economy.

Let us take construction. Labour plans to increase spending still further on construction to soak up the pool of unemployed skilled construction workers: I hear talk about 500,000 of those in the construction industry who are unemployed. But from where I sit I 237 hear tell of a shortage of skilled workers. The Federation of Master Builders report difficulties in recruiting skilled craftsmen and so does the Institute of Maintenance and Building Management. We have no trouble at skillcentres in placing those trained in construction skills. Indeed, in the year to August 1986 100 per cent. of those trained at St. Helens went out of the skillcentre into employment. Any large Government-inspired increase in construction projects would simply worsen skill shortages, with little or no effects on jobs.

Let us take nationalised industries. At the end of the 1970s they were inefficient because they were following the same sorts of policies that the Labour party advocates today. Inefficiency was not contained within them. It infected the rest of the economy. All the nationalised industries that have been privatised are doing better today than ever before. Those still in the public sector have cut their losses considerably. At the beginning of the 1980s the nationalised industries cost £3½ billion of public spending. Today, they cost just over half a billion pounds. I look forward to the day when they will not cost us anything at all.

Just the same is true of local authorities. Labour's plans to increase employment quickly ignore the fact that many jobs require a significant period of training. Jobs are not just a tap to be switched on and off. More importantly, if people are employed by local authorities that cost goes on the rates. What we have seen time and time again is that higher rates produce fewer jobs I do not think I should go this afternoon into the plan that Southwark Council has produced to create 6,000 jobs within the local authority at a cost of some £9,000 each, but it is being relied on by those opposite. Following those guidelines, so they claim, 1 million jobs could be created at a massive cost of £20 billion over the next two years. Mr. Prescott, the Labour spokesman in another place, has said that under Labour local authorities will be the engines of growth in our economy. With those sort of plans they will be stuck on the commanding heights with a stalled engine, because such schemes simply resurrect the inefficiencies and overmanning which has bedevilled our economy over the past 20 years and created the problem we have today of unemployment. Some of their plans will just go to create unemployment directly.

Let us examine Labour's plans for a national minimum wage. I believe that this will risk more than half a million jobs. The national minimum wage was set at £80 a week. They say very clearly that that is only the start. If employees earning over £80 a week sought additional pay rises to compensate for only half the loss of differential—the resolution says that differentials will be maintained in the full, but let us assume it is only half—that would cost, according to my department's estimates, 600,000 jobs. The losses would be greater if the differentials were more fully maintained, if the £80 were raised as they planned or if the scope was widened to cover young people.

I am sure that this House would reject the notion that the Government could cure unemployment either by controlling the whole economy or by providing jobs directly. But that does not mean that the Government can do anything. We can, and we have, for we have set ourselves two priorities: the first is to get the climate of 238 enterprise right. Lower inflation and lower taxation have always been the ultimate goals of our macro-economic policy. Secondly, we must encourage enterprise in employment.

We are talking about Action for Jobs. The action we are taking is detailed, specific and wide-ranging. We seek to raise the level of skill and qualifications of our people. Helping young people to prepare for work and helping to bring the worlds of industry and education closer together are vital and are the key aims of the technical and vocational education initiative and the new city technical colleges. The two-year YTS gives initial skill training which will provide a foundation for a working life. We have developed open learning, the Open College. We have extended the opportunities for training through the adult training programme. We are finally giving a structure to the previous jungle of qualifications through the work of the National Council for Vocational Qualifications. All these are substantial initiatives which we brought about in a very short period of time. They are aimed at tackling one of the most fundamental weaknesses which have harmed the British economy since the war. We are seeking to encourage people to start new businesses, to develop small firms, for they are the job generators of the future.

Between 1982 and 1984, the latest year for which information is available, an estimated quarter of a million extra jobs were created in the private sector. That is good. But when we look into those figures we find that self-employment and firms with fewer than 20 employees created 1 million new jobs during those two years and firms employing more than 20 lost three-quarters of a million jobs. That is why we have a small firms policy, because we are concerned about real jobs, and not just those in employment. We are helping the unemployed to start up in business as self-employed through the enterprise allowance scheme. A total of 175,000 people have started a business that way.

We are helping small businesses with the small firms service. We are encouraging the development of local enterprise agencies and well over 300 have been set up. We are helping finance for small businesses through the loan guarantee scheme. The business expansion scheme is the most generous fiscal scheme in the world for helping the expansion of new companies. We dramatically expanded our many schemes of enterprise training for would-be and existing entrepreneurs, not out of any political dogma but because we know it is for the jobs of tomorrow.

We are seeking to involve people more closely in the success of the company for which they work. Many more employees have a direct stake in their own companies. The encouragement we are giving to share ownership schemes is to bring greater involvement of employees, and we are exploring the possibilities of encouraging profit-related pay. In the year in which we celebrate the 80th anniversary of the Trades Disputes Act, we should recognise that for too many decades British industry has been bedevilled by conflict. We are working towards the end of "them" and "us". The very concept of two sides of industry is outmoded and outdated. There is only one side—people working together in an enterprise for the common good.

239 All these objectives, more skills, the new businesses and greater employee involvement, add up to a strategy which encourages individuals to take responsibility and to support their initiative and enterprise. We give particular help to those who have been out of work for a long time, the long-term unemployed, so that they can get back into work. The restart programme is alone in the industrialised world in offering positive help to each and every person who has been out of work for a year or more. It is a major initiative concentrating on those few in our community who are hardest hit by unemployment to encourage them back into work. I say again what I have said in your Lordships' House on many occasions. When the figures for December come out we shall see that we have reversed the continuing rise in long-term unemployment and that it is thankfully going down.

This amounts to a major strategy to encourage enterprise and employment and to help those worst affected by unemployment. The amendment proposed by the noble Lord, Lord Bruce of Donington, can be unhesitatingly rejected. The job of government is to encourage and support the individual, not to take over and direct people into government jobs irrespective of their effect on the efficiency of the economy or whether they meet the needs of the people.

Of course, it is more satisfying for politicians to announce an intention to create a large number of jobs, even if they are non-jobs created by bureaucracy and unrelated to the needs of people when they can exercise their own choice. Credit for the quiet, anonymous growth of new firms—small firms—which have been creating jobs over the past few years, cannot be claimed by any individual politician, but it is happening and it is creating jobs. As I go round the country I see many examples of firms which not only started up recently but which are now providing employment for our people—and not just in the South-East. P and P Micro Distributors of Rossendale were set up by a husband-and-wife team in 1980. I know because I was a customer in that year. Today, it employs just over 150 people in Rossendale. Take Nimbus Records in Monmouthshire, Wales, in 1983, it had 40 employees; today it employs over 400. It is the first manufacturer of compact discs in the United Kingdom, and it is doing that by inventing its own technology.

Let us take Lilliput Lane, which is producing toys in Cumbria. It started in 1982 with seven employees, now employs 350 and is planning on further expansion still. Let us take the Dobwalls Theme Park in Cornwall and Gwent. It started in 1982 with one employee; today, it employs 75 people. These are just a few examples of companies which started from nothing only a few years ago and are providing employment today for large numbers of people—successful companies, meeting the needs of consumers at home and abroad, creating wealth and creating jobs. If only the party opposite had created this sort of climate in the 1960s and 1970s to encourage new firms, small firms and enterprise, we should not have the problems we have today.

It is to the new businesses such as these that we must look to create growth and new employment. At a time 240 when many larger firms are still expecting to reduce their labour forces to become more competitive, we must look towards the small firms to provide employment for the many. Even large manufacturing developments do not nowadays create large numbers of jobs. Nissan's new plant in the North-East, in Washington, is welcome. It has created about 400 new jobs but more than twice as many people as work for Nissan started to work for themselves under the enterprise allowance scheme in the borough of Sunderland. If their experience follows the experience of other people round the country, in three years' time we shall find for each 100 that started about 120 in employment.

We need large firms, of course we do. But we need the steady growth of new firms to provide the large firms and the employment of the future. The prosperity of this country depends upon the ability of its people to compete in tough, international markets. I returned yesterday from leading my third trade mission to China. There we lived in the real world. We compete against the best in the world: against Japan, the United States. Germany, France, Italy. But I can tell you this. Today for the first time I feel confident that we can compete; today we are winning business, today we are competitive, today we concentrate on quality, today we concentrate on delivery and that did not happen in the past. That is the way in which we create the manufacturing base to which the amendment of the noble Lord, Lord Diamond, refers. We do not do so by giving government subsidy or by looking at other ways. It is by individual small and large firms up and down the land looking at the needs of customers and consumers at home and overseas.

The Government's strategy shows how we have taken on the task of developing that skill and ability for a wide variety of actions, Action for Jobs. Our programmes to develop skills and enterprise are massive. With an employment strategy costing over £3,000 million each year, our commitment to tackling unemployment, to encouraging the skills and abilities of our people, is massive, too. We seek to help people to provide the real jobs which this country needs.

This is the third year I have been privileged to participate in our debate on economic and industrial affairs. Last year and the year before I spoke of growth and investment; that growth continues. Last year and the year before, I spoke of the growth in jobs; that growth continues. Last year and the year before, I spoke of sustained economic recovery; that recovery continues over its sixth year. Our policies have achieved economic success. Our employment strategy will develop the skills and abilities of our people, and I am confident that our people will make use of those skills in creating jobs—jobs that will last, jobs that will last into the future.

Lord Boyd-Carpenter

Hear, hear!

Lord Bruce of Donington

My Lords, I observed growing disapproval as the noble Lord was speaking. I am bound to draw the attention of the House to the remarks made by my noble friend Lord Kaldor, whose absence from this debate we all deplore. He was one of the most brilliant economists in Europe over the last half century and we on this side miss him sorely. I am quite sure that his presence at this debate will be missed in all quarters of the House. Speaking here on 14th November 1985, after one of the noble Lord's orations, I think, my noble friend Lord Kaldor said this: ministers such as Mr. Lawson can point with pride, as previous speakers on the other side of the House have done today, to the steady growth of output under this Government for four or five consecutive years. But that means that we start as if the world and Mrs. Thatcher began in 1981. They did not. She came to power in 1979 and what has happened since 1981 has not yet made up the loss caused in the first two years of Mrs. Thatcher's Government. Those early years are now expunged from memory. They simply ignore the fact that, despite all those years of steady improvement, manufacturing output has still not regained by a long chalk the level at which it stood when Mrs. Thatcher came to power".—[Official Repori, 14/11/85; col. 427]

Lord Young of Graffham

My Lords, the noble Lord will forgive me: the figures I gave were from 1979. I have heard words from the late Lord Kaldor in the past. The figures I gave are from that date.

Lord Bruce of Donington

My Lords, I shall return to the figures where they are appropriate as compared with 1979 in due course. I think I am just as able to quote my sources as the noble Lord is and I do not think he will be able to dissent from them.

The noble Lord's speech comes on top of the Autumn Statement in which the Government announced certain increases in public expenditure. They were announced very delicately. In cash terms, they were announced for the benefit of the public so that it would form a useful backdrop to the election which the noble Lord, by his speech today, evidently anticipates. But when they were addressed to the City the increases were expressed in real terms, and so both were reassured. In any event, the increases were marginal.

It is when we come to the noble Lord's observations on decreased unemployment that we begin to fall on to 242 rather more difficult ground. He claims a modest improvement in the latest figures for unemployment. It depends what one is dealing with. We on this side of the House consider unemployment at present to be one of the gravest of the key issues before the nation.

When we come to figures, we find they may differ from numbers. Numbers are not always quite the same as figures. We have a suspicion that the numbers differ somewhat from the figure configuration—the latest of a revised series—which the noble Lord was able to publish. Indeed, that did not escape the notice of the Financial Times, which observed as follows: The first difficulty … is to know how far the figures are due to various special relief schemes, and how far to a change in the economic environment. A simple calculation shows that the fall in unemployment over the last six months, unadjusted …almost exactly matches the rise in the number of adults involved in special employment schemes". It concludes: Ministers may regard this tentative verdict as ungenerous; hut, they must get used to the fact that while the groundsmen keep moving the goalposts, the crowd will never be quite sure when to cheer". I think what we can do about the existing figures for unemployment—and we want to be encouraged as much as possible—is to say that perhaps it would be better to leave the matter a little open until events over the next few months have deployed.

One characteristic of all governments prior to this Government—every other government since the war—was that their principal objective was the maintenance of full employment. That was in honourable implementation of pledges given to those who fought in the war, in order that their morale and purpose should be sustained. They were told, and told authoritatively, that the world they were coming back to would not be the world of mass unemployment, as it was in the 1930s, but that every endeavour would be made to maintain full employment. That was the whole objective, and it was central to the policy of every government, including Conservative Governments, that that should be sought.

What this Government have done is to eliminate full employment from their objective. Of course they did so with considerable adroitness. They were able to show, or tried to show, that it was the conduct of previous governments, including Conservative Governments, that was responsible for the quite large inflation that took place in the mid-1970s. What was ignored was the quadrupling of the price of oil in 1973 and 1974, which made inflation shoot up in this country. It was no fault of either the Conservative Government or indeed of the succeeding Labour Administration. Indeed, in spite of the massive inflation that arose, together with all the consequences of the massive rise in oil prices towards the end of the Labour Government in 1979, the inflation rate had been brought down to 10÷3 per cent. and unemployment was still declining. The figure was just over a million when the Government of the noble Lord took office in May 1979.

However, the noble Lord's party would sweep all that away and ignore that fact altogether, although I observed that in an unguarded moment the noble Lord referred to the depression of the late 1970s before his Government came to office. Where then is his allegation now, that all governments, whether they be 243 Labour or whether they be Tory, up to the magic days of Mrs. Thatcher, were responsible in some way for all the ills that have fallen upon us?

The noble Lord inherited an inflation rate of 10÷3 per cent. The Government, by their own actions in their first Budget, in their directives over increases in fuel prices, put up the rate of inflation within seven months to 21 per cent. on an annualised basis, and it is from that figure of 21 per cent. that the noble Lord's Government have brought it down. Therefore what has happened is this. The noble Lord's Government—

Lord Young of Graffham

My Lords, I hope that the noble Lord will forgive me for intervening once again. The noble Lord may well have forgotten—in which case I should jog his memory—that oil prices went up again in 1979.

Lord Bruce of Donington

My Lords, it was nothing like quadrupling—perhaps the noble Lord's arithmetic has deserted him temporarily—and nothing like the increase that took place at that time, when this country had no North Sea oil resources, because it was this Government that inherited all the advantages of the exploitation of North Sea oil. Indeed, one of the indictments that we make is that, in spite of having billions of extra revenue from North Sea oil which no previous government ever had, they have made such a miserable mess of the economy today.

The difficulties of the Tory Government in the early '70s and of the succeeding Labour Government in regard to the quadrupling, and more, of oil prices were used by this Government as an excuse to sweep away the whole basis of the mixed economy on which previous Labour and Conservative Governments had operated. There were, of course, disputations between the parties as to the relative pace at which progress should be made. There was no agreement between the Conservative and Labour Parties in those days over quite a number of questions, particularly the pace at which development should take place and on the redistribution of wealth.

But aside from that, there was agreement that the state should retain one instrument of enormous use to it, in order to ensure the maintenance of full employment. That was to retain the strategic and tactical control of the nationalised industries, most of which were operating very profitably before they were taken over, in order that some central direction could be given to the economy in addition to the fiscal measures that were taken. All that the Government did as a deliberate act of policy, the results of which will now confront us, and will confront us increasingly as this year passes, was to cast away any influence over the direction of the economy, particularly in regard to the maintenance of full employment. That was all cast away.

Lord Harmar-Nicholls

My Lords, will the noble Lord give way?

Lord Bruce of Donington

My Lords, I have now given way twice. I do not want to be too long.

Lord Harmar-Nicholls

My Lords, I intervene only because I want to follow the noble Lord. Can he give a list of the great profits that came from nationalised industries? My recollection is that steel was losing £1 million a day and that there were great losses in coal. May we have a list of the supposed profitable periods which the noble Lord has just extolled?

Lord Bruce of Donington

My Lords, I shall give one example straight off. British Telecom was making profits three years before it was privatised and the profits were revised upwards by some creative accounting before the shares were offered to the public. There are plenty of other examples, but if the noble Lord will forgive me I shall not be deflected from the case that I desire to make.

What has been the result of this freeing of the entire economy to market forces? Unemployment has gone up by 2 million. That is a start. The noble Lord cannot dispute that. Manufacturing production is still 7÷5 per cent. below that in 1979 and manufacturing investment is still 17 per cent. below its 1979 level. Perhaps the noble Lord would care to refresh himself from the Box, in order that the figures can be verified.

If the noble Lord will refer to the report of the Select Committee on Overseas Trade of this House, under the chairmanship of his noble friend Lord Aldington, he will find that some of the most grievous damage that has been wrought over these years by an insanely high interest rate policy, and also by the setting of an artificially high rate of exchange, has been the decimation of a large section of British manufacturing industry, particularly the medium and small firms to which the noble Lord has referred. The idea of automaticity, that somehow the oil industry and its expansion will make up for the continued deficiency in quantity and in value of the manufacturing industry, is completely wrong, because only 2 per cent. of the value added in the oil industry comprises payments in wages and salaries, whereas in manufacturing industry the figure is nearly 70 per cent.

But the most extraordinary thing about the Government's policy is that they now believe that 3 million is the foreseeable level of unemployment in the United Kingdom. The noble Lord should refer to the document submitted by his own Government to the EC, or is it to be said that that has only an element of truth in it? I believe that another term is being used in Australia at the present time concerning truth. Exactly the same conclusion was arrived at by the Bide Report in June, as the noble Lord knows. The noble Lord knows perfectly well that the Government have legislated for, and indeed depend upon, unemployment being maintained at 3 million in this country. The noble Lord knows that, because he needs it for other purposes. Among other things, he needs it in an endeavour to hold down wage levels in this country, because of the fear of unemployment that is generated and that is still maintained by the utterances of the Government in this matter.

May I refer the noble Lord to a speech that was made by his right honourable friend the Prime Minister, not in the United Kingdom but in the heady climate of Kuala Lumpur, when she warned British trade unionists. She said that workers were being given the message that if they wanted to hang on to their jobs 245 labour costs would have to come down. That was the message that she gave them from that part of the world where, in accordance with her doctrine of free competition, the wage levels were 30 per cent. of what they are in Europe. It is from that that we knew what she meant by competition.

The consequences of this policy, where unemployment has not shifted and will not shift substantially below 3 million, are very clear: there are certain fiscal and financial consequences. The first—this is within the constrictions of what the Government euphemistically refer to as their strict financial policy—is the extra £21 billion per annum that they now have to spend in terms of benefits combined with reduced taxation yields, the extra £21 billion that they have to pay out or are liable for exactly because of the high level of unemployment. That imposes certain constraints upon them.

What has happened in order that that figure, operating within their own constrictions, can be contained is that the social wage has had to be reduced; and the social wage for a large number of people in the United Kingdom is of considerable importance as an addition to the ordinary wages that they earn. Therefore, there has had to be a progressive reduction in the quality and, in some cases, the quantity, of the social services available which the ordinary individual takes into account in determining what wage claims are made in order to try to improve the standards of life.

What has happened as a result of that? There has been a downward pressure once again upon the real wage that the ordinary worker in the United Kingdom receives. Concurrently—I observe that the noble Lord did not mention it among his string of successes—because money has had to be pressed down, the infrastructure of the country is now in a state of decay. The Audit Commission—the noble Lord can check this if he likes—put a figure of £21 billion on the amount of house repairs now seriously getting into arrears. That has had an enormous significance in the country as a whole.

The final result of these policies of deliberate inflation of unemployment has been the raising of interest rates to quite astronomic heights compared with the rest of Europe and, indeed, compared with the rest of the world, bar one or two countries. This had made it difficult for the development of business and, indeed, accounts for the astonishing number of bankruptcies and liquidations that have taken place in the last seven years. The noble Lord did not mention that in his fit of euphoria. The same consequential effect has occurred because of the substitution of principally German manufactures subsidised into this country by the artificially high rates of exchange. They have thrown a strain on our own balance of payments.

The noble Lord may sit there in complete happiness assuming that his deficit this year will be only £1÷5 billion. Most City commentators think that there will be a deficit of £2 billion on our balance of payments this year, and worse is to come when the oil production of the United Kingdom begins to decline, as it is bound to do. It will certainly not be compensated for by the hoped for increase in invisible exports.

There has been also the structural effect of the Government's policies. It is quite clear—noble Lords 246 on the Government Benches will not bother to argue, I should imagine—that it is the City that now rules, not the Government. The Government no longer follow policies in the interests of the nation as a whole; they do what the City tells them to do. In fact, the Bank of England subsidised Johnson Matthey to the tune of £100 million without even bothering to tell the Chancellor of the Exchequer, and the City rules.

The Government have parted with every effective means of making up the deficiency in manufacturing industry or the incentives available to it. The noble Lord has been busily enjoining ordinary working people that they should operate wage constraints and that they are receiving too high wages because, of course, to the Government they are a cost. But in the City salaries, remunerations, benefits in kind, have been allowed to go sky high, not only without any objection from the noble Lord but even with his support, because it is the people in the City, from his point of view, who are the creators of wealth whereas in fact all they do is to create the claims of wealth, which is what money is. I have no doubt that he will continue to support them. I have no doubt that he will back the new breed of what I call Young's yuppies, who at present are operating in the square mile at salaries of £ 100,000 a year or more. From his point of view, they are creators of wealth.

The social consequencies of this policy of maintaining unemployment at the present level of 3 million—which both the Government and, indeed, most other forecasters foresee will continue at the level of 3 million—is to make the top people more greedy, to make those immediately below in the higher reaches of management more envious, to make the ordinary workers of the country with the ever-present threat of unemployment kept dangling before them more fearful and to cause despair among the unemployed and the poverty-stricken in the country. Moreover, there has been a flaunting of the freedom of opulence and power and, I am bound to say, some of the permissiveness—yes, I use the term, not Mr. Tebbit—that goes with it, and that in front of the prisoners of poverty.

The Government have in fact been responsible for the virtual dissolution of national unity, and they are making progress inevitably towards the repressive state. I observe that the Prime Minister this morning delivered herself of the view, pace the Financial Times, of the one party state. She wants to eliminate the Socialist opposition from this country within two or three years.

Baroness Seear

My Lords, I think that the noble Lord will agree that the elimination of the Labour Party does not automatically bring about the one party state.

Lord Bruce of Donington

My Lords, I am in complete agreement. If the noble Baroness had been present at the recent debate on the EC, she would have seen that I was a fervent defender of her right to challenge the obviously positive decision arrived at by the electorate some time ago. I am a warm supporter of the noble Baroness in the matter of her identity.

247 In view of the progress—or lack of it—that has been made by this Government, we are bound to say that we are in profound disagreement with the divisiveness which they have actively encouraged and in which they persist. We alone, and the policies that we propose which are in broad continuation of those that have gone before, can give the nation a sense of purpose and a sense of unity once again. The time is not far off when the country will give us that opportunity. My Lords, I beg to move.

Moved as an amendment to the above Motion, at the end of the Address to insert "but regret the absence of adequate measures to deal with the present high level of unemployment and the problems created by it."—(Lord Bruce of Donington.)

Lord Diamond

My Lords, we on these Benches also look forward to the maiden speech which is to follow mine and I hope that the noble Lord will not have to wait more than another half hour before he has an opportunity to address us! I also hope I am not too late to congratulate my friend and ally Lord Bonham-Carter on a maiden speech which was both stimulating and balanced.

Perhaps I may first thank the noble Viscount the Leader of the House for the statement he made in introducing the reply to the gracious Speech telling us that we are to have the trial of sending one of our Bills to a public committee as an experiment. I think that is a very wise response to the dilemma we all find ourselves in of having insufficient time to carry out our jobs to the standard we would wish. We on these Benches are especially grateful to him because we have pressed for this for a number of years.

I acknowledge that my enthusiasm for this experiment is not shared by every Member of your Lordships' House and I accept that there may be good reasons for that. However, perhaps I may add that it has come to my notice that on occasion some noble Lords do not appreciate their full rights in connection with such a Public Bill Committee. It is not always fully understood that all noble Lords, whether sitting on that committee or not, are free to attend the committee, to address the committee and indeed to move amendments in that committee. The only restriction is on their right to vote in that committee, but of course they are not restricted in that way in the three further stages which a Bill must undergo. It is certainly a modest self-denying ordinance that your Lordships would be expected to accept, and one of a kind which I believe adds to our major liberties.

I believe that the noble Viscount the Leader of the House was right in describing it as an important decision and I have no hesitation in describing it as yet a further example of improvement in our affairs due to the wise leadership which he has given us since he became Leader of the House.

Our amendment, which I hope to have the privilege of moving formally at a later stage, adds: but whilst recognising the contribution made by services to the economy, regret the lack of adequate provisions to revive the manufacturing base of British industry". That amendment has been so worded for two obvious 248 purposes. The first is to draw attention to the benefit to the economy of all services, including financial services. The second purpose is to controvert in part the Government's suggestion that somehow or other failure in manufacturing output and exports are the corollary of growth in services, which we wholly reject.

As to the benefits of services generally, I must mention employment. There were over 14 million persons employed in 1985 in those services. Going against the normal trend, that is half a million more—not less—than were so employed in 1979. By comparison, approximately half that number were employed in production industries, where some 2 million jobs were lost over that same period. As to the balance of payments, this country increasingly relies on the export of services. In 1985 in the private sector we had a surplus of £7 billion on services, compared with a £2 billion deficit on visible trade. That shows how much we rely on services, both as to employment and as to balance of payments.

I now turn to financial services, the figures for which are of course included in what I have already said. There were nearly 2 million people employed in 1985 in financial services alone. That again represents an increase of a third of a million since 1979. There again we have a most welcome contribution to the economy made by what we call the City. That contribution is based on its financial skills and on its worldwide reputation for integrity. I can speak from personal experience in this area. I was privileged to lead two top-level delegations from the City—one of them to Indonesia and the other to South Korea—in the early 1970s. I well remember the high regard in both countries for British financial services and especially for Lloyd's. It is very important that that high reputation for integrity should be maintained and it is for that reason that I welcome the steps already taken and those envisaged in the gracious Speech which are designed to that end.

I also welcome the latest decision in connection with insider dealing, as it is called, although I very much regret that the question should have arisen which prompted that decision. Insider dealing has always been a very difficult issue and the recent creation of conglomerates on the Stock Exchange has made it even more difficult. To the extent that the recent incident can be regarded as arising under the new system, I am glad that the response has been both open and immediate. That promises well for the future. Much as I welcome these positive and constructive steps taken to maintain confidence in the City's financial services, I must add that I deprecate the tendency in some quarters continually to criticise, insinuate and disparage the efforts of the City's institutions. That is playing into the hands of its many competitors.

Nevertheless, however successful we are in promoting services generally (and we must remember that here too the United Kingdom's share of the world market has declined), it is quite unrealistic to suppose that services could make up the loss in industrial employment and exports if import penetration continues to grow and manufacturing continues to contract, especially with the fall in oil production which confronts us.

249 Nor is it sensible, as the Government in self-defence seem to suggest, to regard the contraction of manufacturing industry as a necessary corollary to the expansion of services. We have enough unemployed, and to spare, to cover any conceivable expansion in both, although it may involve a certain amount of retraining. I do not ask noble Lords to accept that conclusion purely on my suggestion. I want to quote from the latest annual report of the British Invisibles Export Council, which reached me only last night. Its chairman is none other than the former government Minister, the noble Earl, Lord Limerick, who is much concerned to promote our exports of services.

This is what the noble Earl had to say: Thus any debate which seeks to put manufacturing industry and services in opposition to one another and does not address the main issues identified in the Aldington Report is wide of the mark. No foreseeable growth in the services sector can compensate for the eventual loss of our oil supplies. Nor can any foreseeable rate of growth in employment in services, where extra jobs will be numbered in tens of thousands rather than in millions, compensate for the jobs which have been lost in manufacturing industry. We remain convinced that the way forward for the economy is to maximise our trade in both visibles and invisibles". I could not have put it better myself.

Unemployment as has been said, undoubtedly continues to be far and away our most important social problem and the contraction of our manufacturing base our most important industrial problem. The gracious Speech pays scant attention to either. The growing number of part-time jobs for women is welcome so far as it goes but it still leaves more than 1 million women looking for full-time jobs; and it does nothing to abate the misery of well over 2 million unemployed men. To help them in any permanent sense we need to revive the manufacturing base. We need to be able to sell British-made goods at home and abroad at competitive prices. The noble Lord, Lord Young, nods his head. We are on common ground on this issue. Competitiveness holds the key to the amelioration of both problems and is unfortunately the very area where we have to recognise failure.

The noble Lord quoted some figures to try to disprove this thesis. I do not know where he obtained them. I shall read, if I may, a document which ought to have some credibility on the other side of the House. It is called the Autumn Statement 1986 and was presented by the Chancellor of the Exchequer earlier this month. Assuming we still have acceptance of the view of joint Cabinet responsibility, presumably the Secretary of State accepts the contents of that document.

If noble Lords will be good enough to look at page 17 they will see that unit labour costs in manufacturing are set out with the greatest clarity. The chart compares the rise in unit labour costs in the United Kingdom with the rise in the average of other major industrial countries. Starting with 1979 and including the 1987 forecast, the chart shows that in two of those years we in the United Kingdom had to a very small extent smaller rises in the unit costs of manufacturing than the average of other countries, whereas in all the other years, and overall, the rise in our unit labour costs far exceeded the average of other major industrial countries.

250 I am glad that the Secretary of State accepts those figures. They show that we have failed unfortunately in the main task of improving competitiveness; and on that, improvement in employment, in our capacity to pay for social services and in growth, all depend. Nobody was more forthright in making that clear a few years ago than the Prime Minister herself. There is a greater silence from no one else on the matter today.

Both sides of industry, as well as the Government, should give much greater priority to reversing that trend. It is still true that one man's wage rise may mean a fellow worker's job loss where that rise is in excess of inflation, in excess of increased productivity and greatly in excess of the rise in wages of the foreign competitor. Potential sales, because they may no longer be competitive, are lost and redundancies follow. It is certainly not easy for a labour leader to explain to his members that they should lower their sights because, for example, their German counterparts, who earn higher wages and enjoy a higher standard of living, are prepared to accept a much smaller rise to enable their factory to remain competitive and so retain their export orders. But the truth is that it is partly because of past self-restraint that those workers now enjoy a higher standard of living.

But disproportionate stress is laid on this one aspect of wage restraint and nothing like enough importance is attached to the responsibilities of management and of government in increasing competitiveness. Whereas with wage restraint we are talking about variations in the price of the final product of well below 5 per cent., improvements in management, (which result in modern plant and better layout, in better working conditions, in smoother flow of supplies, in better labour relations and in more participation by an informed workforce), can result in improvements in output which reduce unit labour costs by easily five times that figure. Add to that a phased reduction in the employer's contribution to national insurance, a reduction in the highest ever real interest rates and a stable pound, and we could be back in business.

Joining the EMS now would greatly improve the chance of achieving that stability. but, alas, I have lost all hope of the Government listening to our pleas on that score any more than our pleas that they should invest far more in the decaying infrastructure of the country both as a major contribution to reducing unemployment and as a counterpart to their rake's progress in selling the family silver.

The truth is that apart from their determination to sell the nation's birthright the Government have no discernible economic policy. They claim to be firm monetarists, but they have no measuring rod. They seem to delight in a domestic spending spree which is financed by massive individual borrowing and which sucks in imports from abroad; and their proclaimed firm control of public expenditure is evidenced by the Chancellor saying last year, in November 1985, that certain figures would be "held to" for two future years and then this year, in November 1986, that far from being held to they will be increased in those self-same years by no less a total than 10÷25 billion.

Certainly the Government have no policy for dealing with unemployment in any fundamental way.

251 Nor should we be surprised, for they continue to refuse to recognise it as being of the first priority. The Government's first priority is the control of inflation. They think it more important that the 500,000 unemployed in the North-West region, for example, should be able to earn record real rates of interest on their massive savings than that they should have a job.

The Alliance has a policy for dealing with unemployment which we have spelt out year after year. The Labour Party has a policy for dealing with unemployment. Both policies have this in common: they state a time by which unemployment will have been reduced by a specified number. That is what having a policy entails. One takes certain actions so that certain results should follow after a certain time; and as one believes sincerely in the policy one declares those targets openly. When the Secretary of State for Employment is prepared to tell the House the date by which unemployment will have fallen by 1 million then, and only then, will I believe that he is really intent on reducing the figures rather than massaging them.

Lord Derwent

My Lords, I am grateful to noble Lords who have welcomed me with such friendly words. I hesitated to address your Lordships on a day when so many more distinguished Members of the House have signified their intention of speaking.

My noble friend the Secretary of State referred to his recent visit to China. I understand that in the days of the Chinese Empire there were two ways in which the Emperor rid himself of hereditary peers who were supernumerary to his requirements. In the first place, each time a title passed to the next generation the family dropped one rank in the nobility until they eventually reverted to being commoners. Fortunately, that is a system which has not yet commended itself to your Lordships. Secondly—and here the Emperor had powers which I am sure are the envy of my noble friend the Chief Whip—immediate demotion was the penalty for any nobleman who, in the opinion of the Emperor, spoke too long in the Imperial Council. Mindful of that historical precedent, I shall not tempt fate by detaining your Lordships for more than a very few minutes.

My excuse for intervening at all in this debate is that, while many noble Lords who will be speaking today with far more expertise than I, speak with the authority of those who observe and, indeed, manage the United Kingdom economy from the inside, I have over the past year had the opportunity to view it through the more objective eye of the foreigner looking from the outside. After over 30 years in which I, too, was an observer from the inside—first from the Diplomatic Service and Whitehall and then from the City—I more recently have worked with a Far Eastern group for whom the United Kingdom is but one possible area for investment and trade, competing for attention with other countries.

It is amazing how one's perspective changes from a different vantage point. As any policeman will confirm, what a witness sees and the importance he attaches to it depend almost entirely on where he is standing. Indeed, I understand it is common for three 252 totally honest witnesses to give wildly differing accounts of the same situation or the same events. In particular, features which appear large and even overwhelming to those near at hand fade into insignificance or invisibility when viewed from afar.

Today your Lordships are debating the economic policies and measures set out in the gracious Speech and will, above all, be looking at them from the point of view of the domestic scene. Social, industrial, fiscal and even (dare I say it?) electoral considerations may be paramount. What I hope your Lordships will also do is to consider how such policies or alternative policies will be viewed from overseas. Each time we change the policies or the laws here, to give employment, to divide the cake regionally, or in pursuit of what may be very worthy domestic aims, this country becomes either more or less attractive as a target for investment or as a potential trading partner. Yet it seems to me that such considerations are often ignored when important decisions are taken.

Foreign businessmen are not too interested in our woes, our problems, the historical reasons for our policies or even the current reasons for them. They must merely view the nation as it is and as they find it. Of course, they know that, as in their own countries, policies will change from time to time. They accept that. But they have to judge any country against certain basic criteria. Is there a stable political background, and is it likely to continue? Is there a sound legal system which is easily understood, free from red tape and honestly administered? Is the language one they can speak and understand? Is the labour force skilled, motivated and enthusiastic? Will there be sudden, unexpected and unexplained changes in the ground rules? Uncertaintly is the one thing with which business cannot cope. Is there a fiscal system which is, if I may use the jargon of today, "user friendly"? Is the private sector made to feel welcome? Is there the necessary infrastructure of services and skills for their particular business?

I shall not attempt to analyse where the United Kingdom stands in relation to each of those questions and as compared with our competitors. Each Member of your Lordships' House will have his or her own opinion. I would only make a plea that when advocating, or opposing, specific measures we should all, in all parts of the House, consider how the foreign perception of the United Kingdom, judged against those criteria, will be affected.

Finally, I hope that we will always be prepared to reconsider our most precious beliefs—I almost said our most treasured prejudices—in the light of what is happening elsewhere. There is one striking current development which provides a good example of what I mean. It is an event overseas which in my view must have a profound effect on the policies of future British and, indeed, other European governments, and which makes much received wisdom dangerously out of date. I refer to the new United States tax laws. As your Lordships know, the highest marginal rate of income tax in the United States, is—with one limited exception—to be reduced to 28 per cent. Most higher paid, even the most highly paid, manual workers will enjoy a marginal rate of 15 per cent. Six million people now paying tax will be taken out of the tax net altogether. Noble Lords may think this policy right or 253 wrong for the United States, but our views, alas, are irrelevant. From 1st July 1987, that will be a fact of life in America.

Different Members of your Lordships' House may believe that the top rate of tax should be 50 per cent., 60 per cent., 83 per cent. or even more in a perfect world; but I think that we should ignore doctrinal views on whether or not policies based on high income taxes are in themselves desirable. Instead, we should consider whether a policy of high income taxes is even an option which is open to us now that we are faced with the opposite policy in the world's most economically powerful nation. Can we attract or keep the best brains, the best companies or the most desirable investment if our lowest rate of income tax is higher than the American highest rate?

I cite tax rates only by way of illustration. The point I seek to make is that the world is now so interdependent and changes so quickly that any one of us who automatically repeats arguments that we last used one year ago may be guilty of trying to solve the problems of the past rather than the problems of the present or the future. My Lords, I thank the House for its indulgence.

Lord Harris of High Cross

My Lords, the privilege falls to me on behalf of noble Lords in all parts of the House to offer our congratulations to the noble Lord, Lord Derwent, and express our pleasure in his eloquent and thoughtful contribution to our debate. Older Members will confirm that his father will be sorely missed. However, we rejoice in a hereditary system that yields younger Members who can enliven our debates from their recent experience, and we look forward to further contributions as often as the noble Lord can neglect his affairs to be with us on other occasions.

The title for today's debate invites us to judge the gracious Speech by its contribution to long-term economic progress and employment. On the other hand, the two rather nostalgic amendments prompt me to begin by looking backwards over the chequered history of what the noble Lord, Lord Bruce of Donington held up to our admiration as the vanished "consensus" and which I call the consensus of collective Keynesian economic management and planning. That seemed to start quite well. It is within the memory of most of us perhaps how in 1945 a Chancellor came forth who was a trained economist from the London School of Economics, and who often said. as your Lordships will remember, that he had a song in his heart. It did not last long. He was soon succeeded by Sir Stafford Cripps and a real taste of austerity, which still did not fend off the first post-war devaluation of our currency.

From the Cross-Benches I must be impartial. I can all in the 1950s successive Tory Chancellors who from time to time ran foul of what came to be called "balance of payments crises", which were massaged by a succession of credit squeezes, but that did not prevent a repetition of them. In the 1960s under both parties we had Stop-Go, followed by Go-Go, egged on by a National Plan, which swiftly gave way to a second unplanned devaluation under a Labour Administration. Finally, in the 1970s Mr. Healey set a record 254 for a series of mini-budgets which notably failed to prevent high inflation and mounting unemployment that not only made a mockery of central planning but disrupted employment and investment throughout the manufacturing sector.

I believe that the most conspicuous achievement of Mrs. Thatcher's leadership has been the success of her two Chancellors for seven years in managing with one Budget each year to maintain steady progress, at least since 1980, in bringing inflation down from above 20 per cent. to its present 3 per cent. Despite the dramatic eruption and collapse of oil prices, a world recession, a full-scale war in the South Atlantic, a year-long coal strike and many, almost unprecedented international shocks, the anchor of the medium term financial strategy has kept us steady. It is true that the monetary aggregate, namely £M3—which I believe was chosen originally by Mr. Healey with a certain amount of help from the IMF—has been rendered a somewhat fickle guide to the inflationary trend, for reasons that were explained to any who have the stomach to persevere in reading the lecture of the Governor of the Bank of England at Loughborough last month.

But for all the scoffing from the ranks of the unbelievers—and notably the noble Lord, Lord Bruce of Donington—the Treasury's success since 1979 in my view stands in the sharpest contrast to the oscillation, the instability and the accelerating trend of inflation under previous Labour and Conservative Administrations. Indeed, it is that record which today leads me, at least for the moment, to give the Chancellor the benefit of the doubt which is expressed by some monetarists that policy may now already be set on too expansionist a path. In place of the discipline of pre-announced monetary rules we have only Mr. Lawson's judgment based on monitoring all financial aggregates together with the underlying movements of the exchange rate. I admit that he has kept a firm grip on government borrowing, which was frequently a source of inflationary printing in the past, but the Chancellor knows that he is on trial. He has said that the course of prices must be his judge and jury and he knows that the time lags will not delay beyond next year at least a preliminary verdict.

As the noble Lord, Lord Young, argued, the Government can claim many other successes in productivity, investment and growth. But despite all his energetic efforts, which I admire enormously, I fear that a sustained or significant reduction in measured unemployment still seems likely to elude us. Even allowing that the headline figure above 3 million overstates the true number of people anxious to take a job, present policies are not sufficiently directed at reducing the smaller but still large number who are genuinely seeking work.

In Europe and across the world to Australia and New Zealand, governments of quite differing political philosophies have turned against monetary expansion as a discredited panacea for unemployment. Instead they are discovering that deep-seated structural changes in production and in foreign trade require increased flexibility through the liberalisation of labour and other markets, accompanied by lower taxes, as mentioned by the noble Lord, Lord Derwent.

The most surprising convert that I bring you today is perhaps the International Labour Organisation, 255 which since 1919 has done so much to bolster trade unions and to hobble the efficient deployment of labour. In its recent report the director general acknowledges, for example, that the growth of social security is a burden on production and is "causing deep concern". Like a reborn Thatcherite, he talks of the "serious consequences" of deficit financing for high interest rates, reduced investment and the loss of productivity. He goes on to call for correcting the balance between the protection of workers and the flexibility vital for the economic viability of enterprises". Looking at the amendments, I ask what help did the Government get from the noble Lords, Lord Bruce of Donington and Lord Diamond, when they set themselves the difficult task of deregulating shops and buses, reducing trade union privileges, ending the nonsense of the Truck Acts and reducing the impediments of wages councils. The trouble is that the Government now need to go further in tackling what Keynes himself classified as "voluntary unemployment" caused by the effect of social security on work incentives. It was Keynes who back in 1930 acknowledged that even the pre-war dole prolonged and increased unemployment.

I go back to my favourite reading for the time being, the International Labour Organisation and its splendid reborn director general. He writes: If unemployment benefits are high in relation to take home pay, the pecuniary incentive to work is clearly marginal. There are undoubtedly some abuses of benefits such as technically unemployed people engaging in clandestine work". If we do not wish to see benefits reduced or stopped altogether after six months or a year, as in countries as different as the United States or Sweden, there seems to be no alternative to a massive reduction in taxes on low incomes. By increasing net take home pay, we would also reduce pressure for unearned wage increases, which are still pricing hundreds of thousands of people out of work.

My disappointment with the gracious Speech is that it holds no promise of a major reduction in central and local government spending, which still amounts to well over one half of our national income. I have no doubt that lower taxes on earnings hold the key to a more efficient, enterprising and expanding economy that would offer lasting employment to more of our people. However, since both amendments rest on policies that would increase rather than reduce government spending and taxation, I am left with no option but to support Her Majesty's Government against such reactionary tendencies.

Lord Soper

My Lords, may I begin by offering my congratulations to the noble Lord, Lord Derwent, for a maiden speech which I found most cogent and enterprising. If the noble Lord will allow me to pay him a compliment, I begin with the claim that he made. It is important to look upon this affair in our Chamber today from the outside. As is my wont, I have been talking in the open air today. It was a bit damp but I found there a reaction in great contrast to the general temper and spirit of the debate hitherto in your Lordships' House. The main difference, it seems to me, from contact with the outsider, is that for him 256 it is a moral issue. Only in the sense that "economics" is a derivation of the word "stewardship" does it become a matter of expertise.

To quote Mark Twain about the Bible, it will be remembered that he said that the bits in the Bible that he did not understand caused him some bother; but what caused him much more bother were the bits that he did understand. That is a not inappropriate comment upon the nature of the economic situation to which your Lordships have given your attention hitherto this afternoon. With 9 million below the poverty line in 1983 according to Government estimates—the figure must be about 10 million now—with more than 3 million unemployed persons, to say nothing of their entourage and family background, and with the obscene kind of opulence enjoyed by a favoured few, particularly those who seem to be experts in the manipulation of finance, the present situation, as seen by the outsider, so far as I come across him, is a moral collapse. Although he may have personal and selfish reasons for such an estimation of what is going on, I would nevertheless concur with him that, ultimately, what we are discussing this afternoon is the machinery of government in the economic field as that machinery is governed by predominant and background ideas and principles.

I shall devote what I have to say to an examination, however brief and however imperfect, of one or two of those preconceptions. One is the attitude that can generally be regarded as privatisation. The other day the noble Lord was engaged in debate in the Oxford Union. The motion was that the ultimate good of the community would best he secured by the pursuit of private gain. That, to me, is morally intolerable. It seems a direct contradiction of everything—quite apart from a Christian background—being incorporated in the idea that you can only produce good by good. You cannot produce good by evil, except on the basis of a total depravity concept that I would repudiate, as I am sure would your Lordships.

I do not believe that you can unite a community to face the problems that undoubtedly obsess a great many of the minds of those who seek to provide the answers, by claiming that an enlargement of the area of selfishness will contribute to the public good. You cannot baptise selfishness, even with that kind of hosepipe, without creating an intolerable moral dilemma. I would rather face the dangers and difficulties of believing that corporate action is preferable to private gain than go on maintaining the proposition that we shall somehow come out of the problem that we now face by the exercise of the very thing that in large measure has produced it.

I further find that the privatisation idea lends itself to another monstrous misrepresentation of even basic morality. I do not believe that possession, particularly of this world's goods, can ever be a freehold. In all circumstances, it must be something of a leasehold. For people to imagine that they can do exactly what they want with money that they have acquired by good or bad means seems to me a fissiparous attitude that divides any community that could be united, and produces the kind of separation that anyone who lives north of the Tweed can find, by the simple experience 257 of looking at the faces, let alone the circumstances, of those who live in areas of vast and high unemployment.

I hope that your Lordships will not think I am either sentimental or sanctimonious in believing that we have a basic moral crisis here. That moral crisis arises as the result of the very action of privatisation, and the accompanying ways in which it is expressed, so that we have no adequate concept of a united people. We cannot therefore appeal to those who have the opportunity of service because they do not feel any urgency or sense of responsibility for their fellows. It is that elementary sense of responsibility which I would urge upon your Lordships today. I believe that such responsibility can be undertaken only when it is firmly established in a communal effort to face those problems which now afflict us all, either directly or indirectly.

Therefore, in conclusion, in order to be a little constructive, I believe that there is a vast opportunity for the infusion of public money into all kinds of institutions which are now impoverished because of a lack of it. The assumption that that money is not there seems to me to contradict this basic proposition. If we were prepared to put that money into the creative opportunities which could increase the services which could be used to reduce unemployment, we should find that money in the one area which—if you will allow me (I shall say it anyhow)—is a bugbear to many people. I am a pacifist. I believe that the unilateral reduction of the enormous amount of money that we are prostituting to the intentions of armed violence, or the so-called prevention of them, is a source which could be used, and would unite a great many more people than we are accustomed to think would respond to such a plea.

There is no doubt in my mind that what is, above all, required today is a new spark of public enthusiasm for a community which at the moment does not exist. It can begin to exist only when there is a parity of sacrifice to which we ask all to subscribe, and a prospect of a peaceful world in which creative leisure will in large measure take the place of what is now called unemployment. That is a belief. That is a vision. I believe that it forms at least a part of the contribution that should be made to this debate in your Lordships' House.

Lord Boyd-Carpenter

My Lords, I too, from these Benches, should like to express with great sincerity my congratulations, and those of all noble Lords on this side of the House, to my noble friend Lord Derwent on a clear, forceful and extremely interesting maiden speech. It is obvious that he is a powerful reinforcement to these Benches. I express with wholehearted sincerity the hope that he will frequently bring his powerful aid to our help in these debates. As one who was an enormous admirer—and I am glad to say can claim to have been a friend—of his father I shall only add how proud and glad his father would be if by some means he could know what a splendid initial impact his son has made on your Lordships' House this afternoon.

The noble Lord, Lord Soper, has tempted me, I am afraid, from my prepared speech. In that respect I am 258 like Oscar Wilde: I can resist anything except temptation. However, when the noble Lord, Lord Soper—whose sincerity I am sure all noble Lords wholly recognise—held forth to the effect that corporate action is better than individual action, and that it is corporate action which should be applied to our affairs rather than individual action, he did not deal with the question as to which was the more efficient, and more likely to provide the wealth which we need for the maintenance of all the immensely important services which we wish to maintain and to expand in our community.

The noble Lord for that reason denounced privatisation. However, it has been our experience of the nationalised industries that what belongs to everybody belongs to no one. It has also been our experience that those industries that have been denationalised—I prefer that work to privatised, which I think is a clumsy and rather crude expression —have, without exception, done conspicuously better than under nationalisation. In that way they have therefore contributed to the creation of more wealth to be used for the innumerable good purposes for which we in this country want to use it.

The noble Lord, Lord Soper, also sought to find funds for other purposes by running down—indeed, as I understand him, eliminating—the armed forces of the Crown. I can say only that I have lived through two wars, both of which we nearly lost, and our freedom with them because the governments before those two wars did not provide adequately for our defence. If those of my generation, and that of the noble Lord, Lord Soper, cannot learn from that lesson, then I can only say, in words which will appeal to him "Heaven help us".

I come now to the noble Lord, Lord Bruce of Donington. Those of us who have in us a touch of sadism must have derived very particular pleasure from listening to his speech, because the noble Lord is in a terribly difficult position. Will the noble Lord say that the Autumn Statement is a lavish, crude attempt to bribe the electorate by lavish and profuse expenditure; or will he say that it is an example of a hard-faced, brutal Tory oppression denying every good service adequate support? Even the noble Lord with his admitted affection for the manipulation of figures cannot ride both horses. At the end of his speech—which I would not criticise on the grounds of undue brevity—he did not clearly come down either way, which, although a tribute to his adroitness, does not help the conduct of this debate.

I shall say to the noble Lord, in words that I hope he will not think offensive, that if he is taking the electioneering option—as I rather think on balance he was tending to do—there is a good quotation: Belial, in much uneven scale, Thou weighest all others like unto thyself". Given what his right honourable friend Mr. Hattersley is recommending to the public—the vast expenditures in every vote-attracting direction, and the enormous increase in public expenditure—it would be a little odd if the noble Lord or his colleague beside him were to suggest that an Autumn Statement which still keeps public expenditure within the same proportion of the gross domestic product was anything of that kind.

259 The most startling of all the observations of the noble Lord, Lord Bruce, was when he solemnly—I could hardly believe it as I listened—charged the Government and my noble friend on the Front Bench with wishing to keep an unemployment figure of three million. One can accept, I suppose that he thinks the Government are wholly lacking in humanity, and that we are happy at the idea of three million, or anything like that, of our fellow countrymen going through the humiliation of unemployment. It is perhaps the humiliation of not being wanted which is worse than the economic privation. He is entitled to think that. But does the noble Lord also think that this Government are happy at the vast expenditure in billions of pounds on unemployment benefit which could, if unemployment were much lower, be used in other very useful directions? Finally, does the noble Lord feel that a Government—which must face a general election at some time in the next 18 months or so—would welcome figures of unemployment of this measure? The noble Lord is entitled to think us hardhearted: he is not entitled to think us insane.

The central issue of this debate is the question of public expenditure and the taxation needed to maintain it. That is the central issue, and it is the case that the machine is very much tilted in favour of expenditure. I think that the noble Lord, Lord Diamond, a former Chief Secretary to the Treasury, will agree with me that all the cards are stacked that way.

Doctors in hospitals genuinely feel that if they had more money they could cure more people by all the new, elaborate and expensive processes that they are developing. Ministers in social security departments—and I know this because I had 6½ years as Minister of Pensions and National Insurance—know the popularity they would receive if they could expand those payments, and how much good they could achieve in the process. The Department of Education and Science and the Department of Transport all know of expenditures which would be extremely helpful, and, in human terms, they also know that a Minister who spends a great deal is popular and well-liked by the public whereas a Minister who restrains expenditure finds it less easy to put his views across.

However, there is a point at which the taxation needed to finance these public expenditures becomes counter-productive, damaging to the economy and restrictive of the creation of wealth. I thought my noble friend Lord Derwent in his splendid maiden speech made that point superbly well. If we in this country are to be asked to keep our lowest rate of income tax at a level higher than the highest rate in the great United States, we must be putting ourselves at an economic disadvantage and at a disadvantage in the creation of wealth. I believe that, at the higher rate, our system now taxes at 59 per cent. those with large incomes—a percentage which some people might well regard as confiscatory. Therefore high taxation must discourage incentive and saving, and, worse still, must encourage emigration. A brilliant young man, whether in science, technology or finance, who knows that if he goes abroad he can earn a very high salary with less, perhaps no, taxation upon it, will be tempted to transfer himself and his abilities from a country that 260 will take 59 per cent. of the top chunk of his earnings. That must be an economic loss to this country, not only because his abilities are lost, but because we also lose the opportunity of taxing him at all, and obtain no revenue at all from his income.

If we discourage initiative and enterprise in this way we shall handicap ourselves very severely in the highly competitive world in which we have to live. This is not our experience alone; we have seen what these kind of policies have done in other countries. We saw it in France under the previous French Government, and the French, being a quick thinking and quick moving people, hastily reversed it.

The best example of all is that of Australia. I suppose that Australia is basically the richest and most fortunate country in the world, having every natural resource that one's imagination can contemplate: oil, coal, gas, food, cattle, sheep, grain, every mineral that is wanted—every natural resource—and a population modest in relation to the great areas of that great country. Yet in two or three years the kind of policies that the noble Lord, Lord Bruce of Donington, and his colleagues are advocating have reduced that country to a state of crisis, have driven the Australian dollar down on the markets of the world and have even forced the Labour Government there to take restrictive and repressive measures. If these kind of policies can do that to as robust and powerful a community as Australia, it is a little alarming to contemplate what they would do if applied in this country, with our infinitely weaker resources and in our infinitely more precarious position.

If your Lordships want another comparison, let us compare these kind of policies with what happened in this country some years ago. It is a particular pleasure to all of us that my noble friend Lord Stockton is here this afternoon, looking well recovered from his recent illness, and I am particularly glad of that because I want to recall the Macmillan era. In that era taxation was steadily and progressively reduced.

However, the economic growth which that helped to produce increased the yield of that taxation at lower poundage rates, and, as a result, in my noble friend's own famous words, which have passed into history, "You've never had it so good". That is true. My noble friend was attacked for those words, but it is true. We had a period of growth, of very low unemployment, of hardly any inflation for year after year, because a policy of restraint in expenditure and of increasing benefits of one kind or another only as and when they could be paid for, enabled a process to be carried through of increasing them year after year without check and without setbacks.

If we cannot learn from the examples of other countries, let us at least learn from the example of our own. As the right reverend Prelate the Bishop of Manchester said the other day in this House in connection with surgery—and I have given the right reverend Prelate notice that I should be referring to this—"People should pay more taxes in order to improve the National Health Service". That sounds, of course, very appealing. However, if, for that good reason, you are going to push up the levels of taxation beyond the point at which they diminish the efficacy of the national economic effort, you will do no good 261 either for the National Health Service or for any other services in this country. I say with great respect to the right reverend Prelate, that I wish that particularly those who hold high position in this country would not encourage the simpliste view that all you have to do is to put up taxes and pay for all these good things which you want to see done. The only way in which you will achieve these good things is, first, to build the wealth creation which can finance them and, then, to use that wealth as you generate it to expand these services again and again. That is the true way by which, as I said to your Lordships, experience has shown this country to have prospered and succeeded.

There is only one other point that I wish to make to your Lordships. I was distressed that the Autumn Statement contained the statement that in the current year local authority expenditure had increased by 9 per cent. That goes wholly contrary to all the policies of' the government of the day on the management of the economy, and must have a particularly damaging effect on the areas of the local authorities to which this applies, particularly in respect of unemployment.

There is gross extravagance in some local authorities. I will take only one example, that of the Borough of Ealing, which in the current year has increased its office staff at the borough headquarters by 780 people. There can he no justification for that. Of course it is all part of the expansive attitude—expansive and expensive—of so many local authorities under Labour control. Though they have nothing whatever to do with the police, they set up a police committee. They set up committees to support every sort of eccentricity, and may I say every sort of perversion. They support every crankish or fanatical organisation at the cost of the ratepayers.

I hope that another 9 per cent. increase in local government expenditure is not going to be permitted by my noble friend and his colleagues. I know how difficult it is to tackle elected local authorities, but rate-capping has had some success. If one reads the Autumn Statement the one really rather damaging hole ill the whole concept is this growth in local government expenditure, and I hope that when my noble friend replies he will say something reassuring about that.

We have at the moment a clear conflict on financial and economic matters with the Labour Party. Under the present Government our society and its economy have been changed beyond all recognition. We have lived in an era in which the boundaries of the state have been pushed back—although that will annoy the noble Lord, Lord Soper, I think that most other people appreciate that particularly—and in which enormous changes have been made with increasing freedom, increasing deregulation, and therefore increasing creation of wealth.

I think that when the people of this country come to realise the immensity of the change effected by a radical Conservative Government they will be deeply impressed, and indeed contrast it with the most static organisation in the world, which is by paradox called the Labour movement.

Lord Hatch of Lusby

My Lords, I should like to begin by adding my own personal tribute to that 262 already given by the noble Lord, Lord Bruce of Donington, to the late Lord Kaldor. We miss him particularly in a debate of this kind. Those of us who were privileged to work with him and to be inspired by him, and to play upon his patience particularly in our work in the third world, miss him deeply.

My second desire this afternoon is to add also my tribute to the maiden speech of the noble Lord, Lord Derwent. I am tempted to take up the essential point he made about the necessity for regarding our economic affairs from the outside, from the viewpoint of the rest of the world, and, as the House will know, I have often done so, but I am going to resist that temptation this afternoon and postpone it to the future. However, I am pleased that the noble Lord brought this to our attention.

I am also tempted to take up the speech of the previous speaker, the noble Lord, Lord Boyd-Carpenter. All I would say about that is that I believe that he totally failed to understand the basic argument of my noble friend Lord Soper in the contrast between the community interest and private greed, but that is a matter that can be taken up at another time. What I would suggest is that when the noble Lord, Lord Boyd-Carpenter, says that the most important issue in this debate on economic policy is the degree of public expenditure, I would disagree with him.

What I should like to do this afternoon is to make one point only: that beneath all the political arguments regarding our economy there is a deep malaise, a deep canker, in our national economy which affects people of all ideological beliefs, and essentially influences the present of this country and its future, and the future prospects of our children. I refer to the state of manufacturing industry and its prospects in the future.

Last year there was a deficit in manufactunng trade of £3½billion. This year it is forecast that that deficit will be £4½billion, and yet the exports of this country still rely upon manufacturing for more than half—51 per cent. to be exact—of their volume and price. Those who argue that services can take their place should note that only 23 per cent. of our exports come from services. This is quite natural, because if you look at the character of manufactures and services, whereas 80 per cent. of manufacturing output is tradeable—can be sold outside the country—only 18 per cent. of service activity is so tradeable.

As a result of this tragic decline in our manufacturing industry we see what has already been referred to several times this afternoon, the steep rise in unemployment. I would just remind the noble Lord, Lord Young, if he were here—perhaps someone will draw it to his attention—that when he is talking about unemployment being a European problem and an international problem, I challenged him on this not very long ago. He courteously sent me the figures, and those figures show that in the OECD countries only Eire and Spain have a higher percentage unemployment rate than this country. We are top of the league outside Eire and Spain.

Of course this particularly affects manufacturing employment. In a year like last year, which showed a certain new form of growth, the unemployment figures in manufacturing industry rose by only—and I 263 emphasise "only"—5,000 a month. This year those figures for unemployment in manufacturing are rising by 15,000 a month.

As has already been pointed out by my noble friend Lord Bruce of Donington, manufacturing output is lower today than it was in 1979. But I would just refer to the fact that it is also lower than it was in 1973, so that it is not simply a party issue. Manufacturing output has been declining. It rose towards the end of the 1970s, but it is still lower today than it was 15 years ago.

Investment, on which manufacturing industry depends, is lower than at any time since 1963—at any time since shortly after the noble Earl, Lord Stockton, was Prime Minister of this country—with the one exception of the trough of 1981 to 1983, when this Government were also in office.

I should like to quote to the noble Lord, Lord Young, the findings of his own Manpower Services Commission along with the CBI, who have found that one in seven of manufacturing firms in this country find their work curtailed today by a shortage of skilled labour, a shortage of skilled workers, at a time when unemployment is, even by massaged figures, three and a quarter million and by real figures something in the nature of 4 million. Yet despite this clear collapse of manufacturing industry, the department of government which should be responsible for the promotion and the assistance of manufacturing industry, the Department of Trade and Industry, had a budget of £1.5 billion in 1980—a budget which today has fallen to just over £600 million.

What is the effect on the standard of living of people in this country and the prospects for the people of this country of what has happened to manufacturing industry? I am not talking here in a party sense, because I believe that this collapse of manufacturing industry is recognised on all sides: it is certainly recognised by management, by workers, by unions and I hope it is recognised by the Government. I should like to quote—the House knows I prefer to quote from my opponent's words rather than from the words of members of my own party. This is a quotation from the Association of British Chambers of Commerce in a booklet produced in conjuction with the Young Conservatives. It says 1.7 million industrial jobs have been lost in eight years; that British industry's decline has been 'more rapid and absolute' than any of our main competitors (output falling while it is rising sharply in Italy and the Netherlands, as well as Japan)…equally alarmingly that import penetration is soaring". It continues in a direct quote: Our shrinking manufacturing base and deteriorationg trade performance raise a fundamental question about the future of the British economy: how do we pay our way in the world when the oil trade supplus—at present a huge £11.5 million—begins to disappear in the late 1980s". I suggest that those remarks from the Association of British Chambers of Commerce and the Conservative Party amounted to a fair estimate of the most basic threat both to the economy and to the standard of living of the people of this country. So far as I can gather, that was never even approached in the opening speech of the noble Lord, Lord Young, a speech which 264 appeared to be much more geared towards an election that a constructive contribution to the debate in this House.

I am not trying to make a party point, because this is an issue which has faced the country throughout this century, whatever government have been in office and all governments have some responsibility for it. We can go back to the end of last century. It was in the 1880s that the United States first surpassed the steel production of this country; it was in the 1890s that the Germans overtook us in the production of steel—an essential indicator of industrial health. At the beginning of the century this country exported 33÷.2 per cent. of total world exports; the figure today is something under 7 per cent.

Even when we were faced by that clear competition and threat to our position in the world at the end of the last century what did we do? One could mention one or two things. We still were much more concerned with the classics than with technology. While we were still basing our education system on the foundation of the public school classical education, the Germans and the Americans were building technological and engineering colleges. Has the position changed? Today the Germans have over 600,000 apprentices: in this country there are 40,000. In Japan 34 per cent. of 17 year-olds are in full-time education; here there are 30 per cent.

In the countries of our main competitors prestige and remuneration for industiral management are considered to be at the top of the scale. In this country what happens? Young men and women in their mid-20s are getting £50,000 a year and upwards for manipulating figures in the City. How does that compare with the rates that are paid for the same age group in industrial management? I suggest that the story—which I do not think will be challenged in any part of the House—of the imminent danger to the standard of living of the people of this country leads us to ask questions which we cannot answer. We do not know and nobody knows. Many suggestions are put forward, many analyses are offered to us, but we do not know. I do not believe that any single Member of this House can answer that question. What is causing the collapse of our manufacturing industry and the threat to our industrial and economic future?

We know that there is need for an industrial strategy, which we do not have. We know that in other countries there is co-operation among government, unions and management which does not exist here. We now that industry is valued in our competitor countries, irrespective of the character of their governments. We know that the governments of our major competitor countries give a great deal more active, practical support to the industrial firms that produce the wealth than there is in this country. I believe that whether we have a Labour or a Conservative Government, from now until the end of this century we must have a radical, constitutional and structural set of reforms. It is necessary just as much for Labour's industrial policies as it is for any continuation of Conservative policy.

I beg the noble Viscount who is to wind up this debate to take on board this issue of the threat—the collapse, indeed—of our manufacturing industry and tell us what is the view of the Government. I have one 265 specific suggestion to make, and I ask him to respond to it. I know he cannot answer yes or no tonight, but I ask him to respond and to take it seriously, because I do not believe that this comes simply from one part of the House. I ask him to consider whether it is not the case that the essential data we need to face this issue can be extracted only by a Select Committee of this House; that this is the only institution in the country which has the expertise and experience and which can investigate every aspect of training, wages and management—the gamut of issues which affect our manufacturing industry. Will he seriously consider whether it would not be in the national interest for him to give a lead by setting up from this House a Select Committee to investigate the history of the decline of manufacturing industry and the effect of that decline today and to look for proposals for our revival in the future? The future of the standard of life of the people in this country depends upon that.

Lord Alport

My Lords, the debate so far, I think, has been in pretty general terms and included the admirable maiden speech from Lord Derwent, whose father we remember here with great affection. However, I hope that your Lordships will bear with me if, by contrast, I give a case study of unemployment in one great English city. In the last Session, I initiated a debate on the problems of the North suggesting the appointment of a Secretary of State on a par with the Secretaries of State for Scotland and Wales. The idea did not commend itself to your Lordships. Indeed, my noble friend Lord Elliott of Morpeth indicated that I had a totally false impression of the seriousness of the problems in that part of England.

So, this summer, I went to try to see for myself. Although I paid a short visit to the North-East and saw the carefully landscaped graveyard of the great steelworks at Consett, my main aim was to see something of the situation in Liverpool. From the Tory point of view, Liverpool and Merseyside generally have become politically a sort of "no-go" area. This was well demonstrated by last week's by-election—yet it seemed to me that it represented a compelling example of inner city decline, of the social and moral consequences of high unemployment and the failure of central and local government to get to grips with problems of the "second industrial revolution".

My visit was purely private, organised for me by one of the clergy of the Anglican cathedral. I talked to various groups, senior probation officers, senior police, the manpower services organisation, leading business-men, the chief executive of the city, drug-addict counsellors, old-age pensioners and clergy engaged in pastoral work in some of the most deprived areas. Let me record at this point, if I may, the impression (which was apparently shared by at least one of the reporters at the Knowsley by-election) that, at a time when the Christian Churches in general and the Church of England in particular are the subject of so much criticism, it is the clergy who seem often to provide the most effective and even the only resources of leadership and social cohesion among communities, black and white, where the normal pattern of local responsibility has disintegrated under the pressures of the environment and deprivation. 266 The aim that I set myself on my visit was to try to find the answers to three questions. First, why has a great city with a strong tradition of responsible local government become within the last three or four years a by-word for political extremism? Secondly, what, if any, is the connection between high levels of unemployment and crime? Thirdly, what can be done nationally or through local authorities to tackle the problems which face large communities which the changing tidal flow of modern industry and communications has tended to leave high and dry?

It seems to me that the real success of the policies of governments of any party will be measured by future historians by the manner in which they deal with special situations such as Liverpool and Merseyside represent at the present time. There is, of course, a general reference to unemployment in the gracious Speech. Like others of your Lordships, I am glad to hear that there has been some reduction in overall unemployment during recent weeks. This is certainly true of my own town of Colchester; but overall figures, the statistical bases of which have been the subject of frequent changes, do not necessarily represent what is happening in Liverpool or, for instance, in the North-East, in Sutherland. It may even be that they record the fact that the South is becoming more prosperous and that the disparity between North and South is becoming even greater.

I noted a recent speech by the Chancellor of the Duchy of Lancaster in which he seemed to indicate that the North had brought its troubles upon its own head by its record of bad industrial relations, trades union intransigence and failure to meet the demands of modern technology. If it is the policy of the Government to leave Liverpool, for instance, to stew in its own juice, let me recall something said by the right honourable Member for Henley, Mr. Heseltine, during his first visit to Liverpool. "If we have a revolution", he is reported to have said, "it is here in Liverpool that it will start".

I, myself, was warned five or six years ago, by a leading lawyer in the city, that there was going to be trouble in Liverpool and I was warned again during my summer visit that Toxteth was only a start. This brings me to the answer to my first question. Political extremism, whether to the Left or the Right, has always been the resort of communities and nations driven by a feeling of hopelessness and injustice. In Croxteth, 94 per cent. of those between 16 and 21, and 60 per cent, of those between 21 and 65, are unemployed. Unemployment in the city as a whole was, in 1978, 37,000 or 14.6 per cent. In 1984, it was 59,000 or 26 per cent. The manpower services are trying to help, but when the employment that they give ceases after one or two years there is little chance of finding work until, after another year, the individual becomes eligible for another of the services' dead-end jobs. The city corporation is the biggest employer. Under the prospective level of grant, it is likely to have to discharge a further 2,000 to 3,000 workers. In June of 1985, 32,000 men and women had been out of work for over a year. There are very responsible and informed people who believe that no elected authority of any party can face a situation of this sort.

I hope that the Government can assure the House that they fully understand the inevitable consequences 267 if Liverpool is left to stew in its own juice. With unemployment at 26 per cent. and, in some cases in the city among young people, at over 90,000, the answer to my second question becomes pretty clear. In Croxteth, I noted that on the houses there were as many burglar alarms as television aerials. There was one practically on every home, council or owner-occupied alike—and a reporter at the by-election noted the same at Knowlsey. With unlimited time on their hands, with no chance of increasing their money by work, c