Mr Jack Straw (Blackburn)

The hon. Member for Aberdeenshire, East (Mr. McQuarrie) has made an eloquent and compassionate speech, and I offer him my congratulations.

When my predecessor, Barbara Castle, made her maiden speech 34 years ago, she made a promise, with suitable apologies to Mrs. Malaprop, that in her career in this House she would be the "pineapple of politeness". As the right hon. Member for Heywood and Royton (Mr. Barnett) knows only too well, Barbara Castle's reputation for being a pineapple of politeness went before her throughout her parliamentary career. But perhaps other aspects of her reputation are better known in this House. I refer to her activities as a fighter, as unquestionably the most successful woman politician of her generation, as somebody with immense personal and political courage and as somebody who, at her best, was in the company of only three or four others in her capacity to inspire people and to replace sloth by zeal. All those qualities of Barbara Castle were well illustrated in Monday's European election results. Hers was the only constituency in the United Kingdom where there was a swing to the Labour Party.

This evening I wish to pay tribute to Barbara Castle. She was a marvellous constituency Member of Parliament for Blackburn, and Blackburn will miss her. She was, and is, one of the most significant national figures since the war. There are, and will be, many monuments and testimonies to her work. I refer to even the last five years of her efforts to bring about a better pension scheme, and of the commitment in legislation, for which she fought and won, to ensure that pensions rose in line with earnings as well as with prices—a provision which the Conservative Government are now seeking to dismantle.

I also refer to her fight to bring about benefits for the disabled and her efforts in seeking to transform the lives of disabled people and her work in the area of child benefits. Now, at a time of life when many others would be thinking of retiring, or indeed have already retired, Barbara Castle is about to embark on a new career as a leader of the Labour movement for Britain within the EEC.

It is certainly no easy task to follow Barbara Castle—although I greatly prefer following her and being in my position than being in the position of the hon. Member who represented Blackburn in 1910. He replaced Sir William Henry Hornby, who sat in this House for an uninterrupted period of 23 years without ever even making his maiden speech. It was said that he was too shy.

Barbara Castle's maiden speech was devoted to the problems of national reconstruction after the war. In Blackburn the need for reconstruction had been caused not only by the war but by the ravages of the 1920s and 1930s. The town's pre-war prosperity was based on the quicksands of the Empire. Blackburn at one time was the weaving centre of the world, and at its peak over three-quarters of its production was exported to China, to India and to our other colonies. But as those countries discovered that they were better off keeping the raw cotton and making it into cloth themselves, as competition, particularly from Japan, increased, and with the general decline in world trade, Blackburn was plunged into recession as deep as that which affected the North-East or South Wales. It had the unhappy experience of being the worst unemployment black spot of Lancashire—hardly an area in the 1920s and 1930s that was unblemished by black spots.

At its worst in 1931, unemployment in the town reached 46 per cent. Throughout the 1930s the figure rarely dropped below 30 per cent. Indeed, although towards the end of the 1930s other areas of the country enjoyed at least a partial recovery, Blackburn's unemployment shot up in one year alone by 4,000 between 1937 and 1938.

What was the reaction of the town? Was it simply to accept its fate, to accept that the invisible hand of free market forces had been amputated in that area, or was it to decide that things had gone too far and that local government and State intervention were likely to be the only way through? It was the latter course that was chosen, and it was the Conservative leadership of the town which formed an industrial sub-committee and went out seeking State and local intervention to bring new industries to the town.

There were two remarkable successes. The first provided sites and built access roads, with a grant of four-fifths rate relief, low initial rents, cut-price municipal electricity and other aids and inducements, which the right hon. Member for Leeds, North-East (Sir K. Joseph) would no doubt regard as harmful. It persuaded Philips, the Dutch multinational, to establish what became the largest valve-making plant in Europe. Secondly, the town persuaded the Government to site a nationalised undertaking, a Royal ordnance fuse-making factory, in the town. It is perhaps no accident that today these two establishments are still the largest employers in the town with nearly 6,000 employees between them.

Blackburn learnt a lesson from the recession of the 1930s, and the unrestricted private enterprise and the economic policies that went with it gave no solution to its problems. It learnt the lesson again in the recession of the mid-1970s. In that period unemployment rose to unacceptably high levels, and it is still too high. There is no question that, but for the intervention of the previous Labour Government in the form of jobs and industrial aid, unemployment would probably have doubled. Between 1974 and 1979, 4,228 jobs were saved by temporary employment subsidies. Another 449 jobs were saved by other Government measures. With the payment of over £2,800,000, another 2,244 jobs are being created through Government aid to industry and regional development grants.

One of the only new firms established in Blackburn in the 1970s was a small and private firm—upon which Conservative Members are so keen—BTB Engineering. It got off the ground only as a result of intervention and support from the National Enterprise Board. The managing director of that firm has allowed me to say that no private institution was willing to provide the finance to start up the firm. Today, it has 50 employees and it is successful. In the future it will be employing 200.

It is a deep tragedy for this country that the lessons learnt in Blackburn—even by the Conservatives—in the 1930s appear to have been lost to the present Government. The decisions announced yesterday will do nothing for the prosperity of my constituency, the North-West or the country generally.

Let me illustrate that by reference to two of the Chancellor's principal preoccupations—supply and our import and export performance in manufactured trade. In both those critical areas, the intentions of the Chancellor are likely to bear little, if any, relationship to the effect of his measures—as the small print in the Financial Statement makes so embarrassingly clear.

First, I turn to the supply side of the economy, with which the Chancellor is so concerned. What will be the consequences of yesterday's deflationary measures? The Treasury's main forecast is that the GDP will decline by 1 per cent. Worse, it predicts that manufacturing output will decline by 2½ per cent. No wonder the Chancellor and the Chief Secretary refused to give any estimate of the unemployment consequences of the measures. It is a reasonable assumption—a rule of thumb—that if GDP declines by 1 per cent., so may employment. If that is true, unemployment is likely to rise by at least 250,000.

Conservative Members still fail to understand—though they may learn fast enough from the howls of their constituents—that, although the cuts are in the public sector, much of the unemployment will fall in the private sector. It is also a fair working assumption that if manufacturing output falls by 2½ per cent. employment in manufacturing will fall by a similar percentage. That will mean a decline in manufacturing employment of 180,000 to 200,000.

Exhortations from Conservative Members to work harder will sound hollow to those who, as a result of the Budget, end up with no work. Conservative Members may provide two answers to that. First, they may dispute the Treasury forecasts. The text of the Red Book indicates that the Chancellor appears to have come close to disowning the forecasts altogether. I hope that the forecast pessimism proves incorrect. However, the forecasts are based on what has happened to our economy over the past 10 to 15 years, including the period when the Conservatives tried this strategy once before. It hardly lies in the mouth of the Chancellor to call upon the weight of evidence when it suits him—as he did yesterday with reference to the measures on exchange control—and then to deny the weight of the same evidence when its conclusions are uncomfortable to him.

Secondly, Conservative Members may say that even if the forecasts are correct the country is going through a temporary lean period and that we shall climb out of it in late 1980 and early 1981. However, once in a trough it is doubly difficult to achieve real growth. One has to climb out of the trough before one can even start. In the intervening period of decline, coupled with the poor prospects for world trade—about which the Chief Secretary spoke earlier—and the general disruption caused by the rise in oil prices, manufacturing capacity may be shut down for good. That will create further supply problems when, at a future date, the Chancellor tries to increase aggregate demand to get us out of the bog.

The Budget measures are likely to make the difficulties with supply even worse. Nineteen out of the 20 businesses in my constituency are small and they employ fewer than 200 persons. The prospects for those firms are bleak indeed. The little extra that business men have in their pockets as a result of yesterday's Budget will not in any sense compensate for the overdrafts upon which they rely for their survival being increased by 2 per cent. to 3 per cent. and now standing at 17 per cent. or 18 per cent.

While we are talking about small businesses, may I remind the House that the Chancellor of the Exchequer referred in the debate on the Loyal Address to the importance of small businesses in the United States and the lessons to be learnt from the United States—lessons which, he claimed, we reject at our peril. One lesson from the United States that the right hon. and learned Gentleman has already ignored is that last year Congress increased Federal subsidies and aid to small businesses by $300 million to a total of $935 million at a time when he is cutting such aid. So much for the lessons from the United States.

The second major deficiency of the Budget is that, far from helping home manufacturers, it may actually suck in even more imports and make it more difficult for our exports. The high and ever-increasing desire of British consumers to purchase imported manufactured goods is well rehearsed. The Chancellor made the point himself yesterday and in the debate on the Loyal Address when he drew attention to the fact that last year imports of manufactured goods had increased by 13 per cent. while our exports were increasing by only 2 per cent. in volume terms. The Budget is likely to continue that trend, and, indeed, make it worse.

There is no notion in the Budget Statement as to how the Government will seek to turn round the performance of our manufacturing industries. I suggest to Conservative Members that it may not be too long before the concern about the future of our manufacturing industries and our performance in export and import markets becomes so strong that some of the mutterings that we hear from Conservatives in the corridors of the House about the need for import controls are raised in the Chamber.

One additional burden that manufacturing industry has to bear is the distorting effect that North Sea oil has on the value of sterling so as effectively to overprice the value of our exported goods.

One reason why the Government's policy on subsidies for employment and industry is so short-sighted is that those subsidies, as well as helping to create and save jobs, act positively to benefit our exports by effectively subsidising their price. That can be well illustrated by a set of figures produced earlier this year by the Treasury for the Department of Employment. They suggested that for every £100 million spent on the temporary employment subsidy there was an improvement on the balance of payments of between £140 million and £180 million—compared with a deterioration in the balance of payments of £60 million if the same sum were expended by way of tax cuts.

Such aids and subsidies enable us to secure and improve the domestic manufacturing industry and its supply of goods and they enable us to subsidise our exports against an over-valued currency. Yet the Government's response is not to maintain or increase those aids and subsidies, but to slash them by nearly £400 million.

We are told that the Budget is part of a new beginning, but in my judgment there is nothing new under the sun about the policies that we are hearing from the Government. The sterile policies of monetarism have as much relevance to solving Britain's deep-seated industrial problems as the politics of the gold standard had in solving the problems of the 1920s and 1930s. Then it was my constituents who suffered while the Conservatives learnt. I fear that it will be the same again in future.

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