Mr Quentin Davies (Stamford and Spalding)

It is with a curious mixture of pleasure and awe that I rise to speak for the first time in this Chamber. It has always been the greatest honour to be elected to this House. It is a special honour for me to have been elected by the electors of Stamford and Spalding in south Lincolnshire and to have been sent here to succeed Sir Kenneth Lewis.

Sir Kenneth Lewis was a Member of this House for nearly 30 years and was, I believe, much loved and respected here. I would be intensely surprised to learn that he had a single enemy in this House. Certainly in south Lincolnshire and in Rutland—which he also represented for so many years—he has only friends and admirers.

Sir Kenneth Lewis now enjoys a position of great distinction in my part of the country. That reputation is based on three things. The first is the tremendous dedication and ability with which he defended the interests of his constituency down all those years. I lost count long before the election of the number of people and businesses I encountered whom he had assisted, often very decisively. Secondly, he gained a reputation, not merely locally but I know also with the national press for exceptionally astute and sound political judgment. The third reason is perhaps the most important of all. Throughout his long political career, he always faced every issue with the utmost honesty and straightforwardness. He was always, above all, his own man. Everyone always knew where they stood with him. It has been a great advantage for me to stand for Parliament in a constituency where the reputation of the profession of politics stands so high, thanks to the work and example of Sir Kenneth Lewis.

I hope that I may be forgiven for making a few remarks about my constituency, which, in my view, is insufficiently well known. Very few of those who speed up the A1 to the north of England or to Scotland realise that in bypassing Stamford, only a mile away, they are bypassing what Pevsner describes as one of the loveliest and I describe unhesitatingly as the loveliest, stone town in England. Stamford is an ancient town. It had a college long before the university of Cambridge was founded, and it maintains, its fine educational institutions and traditions to this day.

Stamford lies in the midst of the rolling uplands of south Lincolnshire. The eastern part of my constituency, which covers a large part of the Fens, has as its natural centre and capital the town of Spalding. Spalding is also an ancient town, also lying on the banks of the Welland, boasting in the Gentlemen's Society the oldest literary and scientific society in the kingdom. But Spalding has also become known, first nationally and now internationally, as the capital of the bulb-growing industry in this country. Its flower festival and tulip parade are now known across the globe.

I have said that too many people bypass my constituency. I am glad to say, however, that we have not been bypassed by the years of Conservative prosperity. Businesses are booming; unemployment, although still far too high, is now in single figures and continues, most encouragingly, to fall. The major employer is agriculture. Agriculture is an industry that I believe is second to none in this country in its record of efficiency, productivity and technical improvement. The trouble with success, however, is that it is too easily taken for granted. Worse still, those essential foundations of success—the risk-taking, the investment and the hard work — can too easily be taken for granted, neglected and allowed to decline.

Agriculture has served this country exceedingly well. Indeed, I believe that no industry deserves better of this country. And no industry, if it were undermined through the deliberate erosion of the framework within which it has prospered, would bring in the train of that decline more damaging consequences for employment, for our balance of payments and for our national prosperity. I may well seek to address the House on that subject again later in the Session.

I would not have you think, Mr. Deputy Speaker, that Stamford and Spalding is a purely agricultural area. On the contrary, the prosperity to which I have referred is based on a wide diversification between different sectors of economic activity. We have in Stamford the leading diesel manufacturers in the country. The great plants of Mirlees, Blackstone, Newage and smaller specialised diesel companies such as Tempest Diesels, send their diesel engines to the far corners of the earth. Elsewhere in the constituency, we have successful young electronics companies such as Park Air Electronics and Autocast. We have in Bourne a very successful printing industry represented by Tudor Labels and Warners. Spalding is, or should be, the natural capital of our country's food industry. British Sugar and Smedleys have large plants there. But two great British food manufacturers are inextricably linked with the name of the town of Spalding: Geest, and George Adams, famous producers of Lincolnshire pork pies and meat products.

I have already referred to our prosperity. Indeed, we have begun to encounter some of the problems of success. One of them is a lack of certain essential skills in some of our industries. In recent months, businesses in my constituency have found it impossible to find electronics apprentices, skilled printers or skilled bricklayers. The same applies to a host of trades associated with computers and information technology. Nevertheless, the overall level of unemployment is still too high. That is the tragic paradox that we face, not only in south Lincolnshire, but throughout the country.

At the last general election, there was an overwhelming consensus between all political parties that the further reduction of unemployment was the necessary first task facing the new Government after election day. There was no dispute between the parties on the overwhelming importance of that task; the dispute was merely about the most effective means of grappling with it. The electorate had to choose which party it believed was most likely to be able to do that. It places a great responsibility on my party—a responsibility that I personally welcome—to make it clear that that confidence was not misplaced.

Anyone who looks at the money supply figures or the balance of payments figures will be immediately convinced that, whatever causes us a continuing too high level of unemployment, it is not macro-economic demand deficiency. I am well aware of the methodological difficulties involved in deriving the monetary aggregates and in interpreting them. Rather less work has recently been put into examining the balance of payments as an effective measure of the balance of demand. Indeed, there are traps in doing so, not least the fact that sales of services are aggregated with investment income from abroad in the invisible part of the statistics.

Nevertheless, however we look at any of those statistics, we come to the same conclusion: it is not macro-economic demand deficiency, but supply side deficiencies from which we suffer. They are many, they are various and they are certainly too numerous and too extensive. There is the obstacle to geographical mobility posed by the council house waiting list system and the effective absence of a private rented sector. I am delighted and greatly encouraged that the Government have made it clear that they will tackle that problem in the present Session.

There is the further problem of continuing restrictive practices and artificial obstacles to the growth of productivity. Again, that is a matter we intend to tackle in this Session, and I thank heaven for it. There is the more delicate problem of the employment trap for those currently living on benefit. The Government, with great courage, have decided to face the problem in the current Session at least so far as those in the 16 to 18-year-old bracket are concerned.

There are the supply side deficiencies created by the failings of our education system; the fact that we do not always turn out people with the skills required by the businesses that are there to employ them. That is a major problem and, again, I thank heaven that the Government will tackle that in this Session.

Beyond that, there is the equally important, or even more important, matter of continuing in-work industrial training. There was nothing about that in the Gracious Speech, but I believe that during this coming Parliament it will be essential that British industry resolve to spend more time and more resources on it, and to give greater priority to that essential aspect of our relative continuing industrial weakness. Even against the background of encouraging prosperity, none of us would wish to take anything for granted or wish to cease to grapple with what deficiencies remain.

However, when one looks at employment, there is one fundamental matter one cannot avoid facing. I have always believed — I would have thought that it was perhaps the most non-controversial and elementary statement that I could make on the subject in the House—that employment, or the demand for labour, was a negative function of the cost of labour. Had I not heard, with more than some astonishment, the remarks of the hon. Member for Dagenham (Mr. Gould), I would never have dreamt of inflicting on the House such a gratuitous platitude. I do so now, not because I have the slightest intention of taking issue with him—it would hardly be appropriate to do so in my maiden speech—but because I am convinced that, on reflection, he will agree with me.

I believe that in every corner of the House there will be agreement with the proposition that firms continue to recuit and employ as long as the value of the marginal output of labour is greater than the cost of that labour. It follows that a sure way of increasing employment is to reduce the real product wage, either by increasing productivity or by decreasing wages themselves. The fact that productivity is favourable to employment should not surprise anyone. That is why, in those countries which have consistently had the fastest rates of growth of productivity—Japan, the Federal Republic of Germany and Switzerland—there has also consistently been the highest level of employment. That is why, at a time when we have had unprecedented rates of growth in productivity in this country, we have, since the 1983 election, enjoyed an unprecedented growth of employment.

I believe that my remarks about productivity will be entirely non-controversial. I am certainly not going to make the controversial suggestion that we should be reducing wages—not, however, merely because I do not wish to be controversial, but because I would not dream of supporting such a proposal. Any such proposal would create an outcry, not merely in the House, but throughout the country, which would be thoroughly understandable.

But if a way could be devised of gaining the benefits for employment that would flow from a reduction in wages, while avoiding the obvious disadvantages of such a move, I believe that the House would he sincerely, profoundly and permanently grateful to the begetter of such a concept. And that is precisely what has been achieved in the proposals on profit-related pay in the Finance Bill, so ably moved by my right hon. Friend the Chief Secretary.

Much has been said this afternoon about the advantages of profit-related pay. I agree with all that has been said on the subject. Of course, an important advantage that will flow from it is further to identify the interests of the work force and staff with the success of the firm for which they work. Of course, an advantage will be that profit-related pay is likely to reduce the extent of any fall in unemployment in a new recession. However, I profoundly hope that no recession is in sight, and that that advantage will therefore remain purely academic for a long time. But the most decisive advantage of profit-related pay is that, all other things being equal, it will lead to the generation of new jobs and to an increase in employment. It will do so for the simple, technical but utterly compelling reason that the profit-related element in pay will henceforth be regarded by firms not as a part of fixed costs, but as a part of their variable costs, even in the shortest term, and that it is the lower, fixed, level of cost on which firms will base their recruitment decisions.

It is a convention in the House, to which I wish to subscribe, to remain entirely non-controversial in my remarks this afternoon. Given the consensus to which have already referred on the overwhelming importance to our country of further reducing unemployment and making sure that that favourable process continues in the years ahead, I believe that a measure that is so obviously and directly designed to achieve that end cannot but enjoy the overwhelming and enthusiastic support of all parties in the House.

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