Public Expenditure

Part of the debate – in the House of Commons at 12:00 am on 9th March 1979.

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Photo of Mr Edward Leadbitter Mr Edward Leadbitter , Hartlepool 12:00 am, 9th March 1979

My point is that we should have a new look at the manner in which we make decisions about the economy, taking into account the national interest and the cost of putting people out of work. The House will have to learn not to pay too much regard to the prognostications of trained economists, firstly, because they do not agree with each other and, secondly, because the broader backcloth of lay opinion takes into account the character of the people of this country.

The 4,000 men at Haverton Hill and the 1,200 men at Falmouth who are now out of work have to be kept. It is common sense to me that their unemployment is a serious waste of a national resource. Therefore, the decisions of British Shipbuilders and British Steel are not valid if the totality of the national interest is not taken into account.

More than that, does it not seem odd, against the background of world depression and the lack of orders for steel, that I read the other day that British Steel—I stand to be corrected on this—is advising on improving steel productivity in China? Where is the sense in allowing a contraction in the British steel industry and sending our technicians abroad to build steel plants? While we do not want a protectionist society which would mean looking selfishly at our own parochial position—because we need to develop economic relationships with other countries—the national interest must take priority.

The decision of British Shipbuilders at Falmouth was not taken in quite the way that the hon. Member for Gloucestershire, South described. British Shipbuilders did not want the Falmouth firm. It was a dead duck when it was taken over. It is not without some significance—I shall not develop this theme, because of the importance of future negotiations—that a certain gentleman, very active in the House of Commons during the proceedings leading up to the Bill's becoming an Act, still has a canny eye on the equipment at Falmouth. Perhaps he hopes to have some use for it, perhaps on a lease and job-to-job basis. There is need to examine the behaviour of certain people over the future of that Falmouth firm. I shall say the same sort of thing whenever there are other closures.

Those were my examples, but the motion raises other matters of public importance. Apart from the fact that my hon. Friend the Member for Salford, East is urging the House to go for an expansionist policy, there are other fundamental matters which are causing alarm in other parts of the country, and perhaps generally. I refer to the construction

industry. That industry has suffered for years from an unclear policy which has chopped and changed. Local authorities have also suffered, since the war, from changing specifications and changing expenditure restrictions, to the extent that they have never had the opportunity to make judgments about relating housing needs to housing demands.

It is odd that so many years after the war, when promises were made and expectations raised, we still have thoroughly disgraceful housing conditions in our towns and cites. The problem is sharpened because we have been building up an infrastructure of welfare provision. The party to which I belong has been doing that constantly, in the form of old people's homes, welfare centres, clinics and hospitals. Our success has brought into relief our poverty areas, which need immediate attention.

Therefore, I support my hon. Friend in asking for a special expansionist policy so that we can do two things. The first is to create employment in the construction industry to provide confidence and certainty, and the second is to remove those scars that still mark our cities and towns as areas where we are coming dangerously near the establishment of ghettos, especially in the conurbations. My hon. Friend, who has more experience of housing matters than I have, was right to include the problem of housing in his motion making a plea for economic expansion.

The National Enterprise Board has been mentioned. My right hon. Friend the Secretary of State for Industry recently sought considerably to increase its borrowing powers and those of the Scottish Development Agency and the Welsh Development Agency. When he announced the successes of those bodies, I noticed a great deal of reticence on the Opposition Benches. The right hon. Member for Leeds, North-East (Sir K. Joseph) said that he was not enamoured of the Board, and he said little to give confidence to those who have to manage the Development Agencies.

Therefore, it is important to underline how special areas have had a better deal under the Labour Government's policy than they would have had if the Board and the Agencies had not been created. The chairman of the NEB and all his colleagues are to be congratulated on raising the equity to invest in companies which, although efficient and having good reputations, were finding great difficulty in keeping going in the present world economic climate. About 50 companies—not least Rolls-Royce, a national institution—have been kept going by Labour's policies. I am sorry that for short-term party political gain, an object that I never pursue, the Opposition's chief spokesman on economic and industrial matters had little to say about the enterprising Board.

I must give some facts that I hope the Board's chairman and my right hon. Friends will take into account. Because of its enterprise and care, the Board now has equity holdings in companies employing about 300,000 people, who have benefited from the confidence created by the Board's impact. However, in the North-West region, where there are serious economic problems, only 35,000 people come under the Board's activities.

There are 16 per cent. of men out of work in my region. We have a declining steel plant, which was helped recently by political pressure and the BSC's initiative in obtaining orders for steel tube for the rolling mills. With 16 per cent. of men out of work in a region with a population as large as Scotland's, we have only 1,700 jobs taken care of through NEB intervention. That shows the imbalance to be set against the Board's success story.

Scotland and Wales each have an active Development Agency, with powers to deal with the environment. Long may those Agencies stay, for there is much work still to be done in those countries. The Northern region has not had the benefits of the English equivalent in the form of the NEB. Moreover, the Board has no powers to deal with the environment.

Many people could well argue, and I would take the point, that the Labour Government have given my region hundreds of millions of pounds over the past four years for industrial development. But the region suffers from a particular difficulty. The large majority of companies that have settled in the region have their headquarters outside it. Therefore, as soon as there is a little economic draught, they close down the factories there. I have asked my colleagues to investigate this serious matter.

Although we have the advantages of public expenditure in the area, some private firms in particular are taking the grants and loans and before four years are out are announcing closures. A firm will issue 90-day notification of closure orders and talk about severance pay. The men begin to leave, and then the equipment is taken down country to the parent company. The factory is put on the market for sale with an enhanced value. To my knowledge, one company of international importance made £3 million last year in that kind of deal, although not all of it was made in the Northern region.

While we are talking about expansion of the economy along the lines proposed in the motion, we must also talk about how our resources are used. Expansion does not necessarily mean the spending of more money. It means a more vigilant approach to the utilisation of our resources. If large amounts of money are being spent in a region but are being creamed off by industrial bandits, that matter should be examined.

I can give a perfect example. There is a factory in my constituency which received such grants some years ago and is now making a profit. It had a turnover of more than £1 million and profits of £91,037 last year. It is part of a company that has another two factories, one in Mansfield and the other in Ilkeston. The latter has been in the process of being built for the past two years and is therefore making no profits. The former is also making no profits. Only the Hartlepool factory is making a profit. Therefore, it seems absurd that the company is closing it.

Where will the equipment from that company end up? I understand that it will go to Mansfield or Ilkeston. I was told by the managing director that he had jobs in Ilkeston for the workers in my constituency. He also said that the housing authorities in that area would re-house those workers. However, when I checked the position I discovered that that was a cock-and-bull story.

The motion before the House has great significance. Although there may be an interplay of ideas for party political purposes, the result is nowhere approaching the priority that is needed to take advantage of the commanding heights of the economy. We must ask whether we have not gone too far in contracting various industries and closing down firms. It is far better to keep men in work than to throw further burdens on our social and welfare services.

How are we able to meet the present position? In shipbuilding, the answer appears to be simple. Why not adopt a scrap-and-build policy? Other countries in their steel industries have pursued that policy with great success. Let us heed the lessons of the last few years. Instead of building inflexible large plants, let us plan for new capacity in small and medium-sized plants to take advantage of our home market.

We all remember what happened many years ago when we allowed coal mines to close, almost without restraint. We were eventually left with good coalfields and a shortage of miners to work them. We created a crisis of confidence in the industry to such an extent that young people were not prepared to enter the industry as a career. It took years for the National Coal Board to overcome that problem.

Let me turn to the creation of expansion in our economy. The first question is how to control inflation. The second is how to control that process without increasing taxation. I once remember a leading politician, the night before the poll, suggesting that he could put forward a programme for the United Kingdom. When he was asked whether he could pursue such a programme without raising taxation, he replied in the affirmative. That was a most crippling answer by a member of a political party—and I refer to the Labour Party. We must not overlook the fact that outside this House we have an intelligent electorate which is imbued with wisdom. We should not ask the electorate to use that wisdom only once in five years and ignore it for the rest of the time. We should let the public know our intentions so that we may judge their reactions and modify our views.

We need to examine the impact of an expansionist policy in respect of taxation. However, the Tory Party takes the opposite view. It seeks to control inflation by reducing public expenditure. Let us not forget that the Labour Government have increased expenditure. We know that in regard to hospitals, the ambulance service and the schools much more money needs to be spent. Who will dare to say that health education and social provision should be minimised to satisfy worn-out arguments about inflation? We have the ingenuity, ability, expertise and many facilities available to harmonise our objectives for defeating inflation with an expansionist policy.

We must give the people a sense of confidence that a long-term policy is being pursued. We must not become bogged down in the detail of arguments about inflation. The history of the past four or five years proves that that was the wrong way to deal with the position. It was wrong in 1972–73 to create confetti money. That set this country on the road to an inflation race the like of which we had never seen. It has taken the past four or five years, including the process of hard negotiation with the trade union movement and the CBI, to reduce inflation from 30 per cent. to a figure of 8·7 per cent.

Common sense in these matters must prevail. Public confidence must be restored and people must feel that we are overcoming our problems. The nation knows that the Government have been painstaking in their negotiations with the unions to defeat inflation. Eventually great credit will be accorded to the trade union movement in responding to the Government's call. The members of that movement responded to the appeal of the Labour Government in 1974 asking for inflation to be brought down. Our supporters suffered pressure on their wages to such an extent that they reached the stage when they required an improvement in their wages.

A great deal of good has resulted from those hard negotiations. A pay body has been set up and we are now pursuing our policies in a new era of harmonisation. Therefore, it is most timely that this motion is before the House today. The terms of my hon. Friend's motion comprise the next step in our thinking. If the confidence of the people is restored, and if it can be seen that we have come out of the storms of our economy and are about to enter a more heartening era, the future that lies before us is bright.