Part of the debate – in the House of Commons at 5:42 pm on 25th June 1980.

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Photo of Mr Geoffrey Rippon Mr Geoffrey Rippon , Hexham 5:42 pm, 25th June 1980

The House will have listened to the hon. Member for Newcastle-under-Lyme (Mr. Golding) with respect, He struck the right note when he said that we must all try to act together—employers, trade unions and the Government—in trying to solve these problems. He said that that applied particularly to youth unemployment, but I suggest that it must apply right across the board.

I do not often agree with an intervention from a sedentary position by the hon. Member for Bolsover (Mr. Skinner), but when he said that we do not want a Tweedledum or Tweedledee attitude I think that he was speaking for many hon. Members. I wish that the right hon. Member for Glasgow, Craigton (Mr. Millan) had adopted a similarly constructive attitude. I do not wish to be partisan, but we are entitled to point out that the Opposition are in no position to cast stones at the Government on unemployment.

Under a Labour Government unemployment rose from 600,000 in 1974–75 to over 1,370,000 in the years 1977–79, and they anticipated a further rise. Labour Governments have twice doubled unemployment in the North-East, and I do not wish that to happen again, particularly under a Conservative Government. All hon. Members know that the North is traditionally vulnerable to economic recession. Registered unemployed in the Northern region in March of this year was only 9,000 above the total for March 1979. But everyone knows that the upward trend is continuing, and it cannot be ignored. Neither side of the House can be acquiescent about unemployment, which has been running at over 9 per cent. in the Northern region for a number of years.

We should all be able to agree that there are no benefits from high unemployment. We cannot exaggerate the economic and financial cost or the social cost of unemployment at its present level. There is the cost to the economy in terms of low production, the financial cost to the Government in terms of loss of tax revenue, and the payment of unemployment and social security benefit. That is now well over £1,000 million a year higher than it was in 1974, and it is rising. That, of course, is to the detriment of the public sector borrowing requirement. Above all, there is the cost to society in terms of the social unrest that prolonged unemployment may provide. We should not underestimate the consequences of prolonged unemployment on social, racial, religious and regional tensions and, in the course of time, on attitudes to work and society.

The pernicious effect of a high level of unemployment is particularly noticeable among school leavers, and, as far as we can judge, it is likely to get worse. We cannot overestimate the debilitating effect on young people who have never had a job. They appear to be rejected by society without a chance, and that is bound to lead to a measure of disaffection. I am grateful for the comments of my right hon. Friend the Secretary of State for Scotland about the Government's actions in regard to the youth opportunity programme and training programmes. In the longer run, perhaps we should consider whether it would not be better, for the young people and for the country, to introduce a period of conscription, not necessarily into the Armed Forces but into the public service. Perhaps that is a matter for another occasion.

In the next few years we shall have to give a high priority to regional policy as part of our general strategy. Perhaps the old economic planning councils were not the best instruments for co-ordinating regional policies, but they were better than the vacuum that we have at present. Perhaps too many of the old grants, aids and subsidies were merely palliatives and did not deal with the structural changes that are taking place in industry which we cannot avoid. However true that may be, it is no reason for precluding sensible spending to assist productive industrial change, notably on training and on measures to improve labour mobility.

I am all for placing limits on public expenditure, and in any Department with which I was involved the expenditure went down, not up. I have always maintained, and I shall continue to maintain, that what matters is how the money is spent-how it is apportioned between investment and consumption, and how it is. apportioned between the regions. Instead of wasting over £1,000 million a year in additional unemployment and social security benefits, we need—and the CBI recognises it—a positive regional policy to improve the utilisation of resources in the less prosperous areas of Britain. That means a sensible public investment programme that creates wealth. If properly applied and administered, such a policy could reduce unemployment in depressed areas without—and this was always the anxiety—causing overheating or other damage to the rest of the economy. We had some problems in regard to overheating of the economy in the early 1970s, but we do not have those problems today. It is arguable which is the worst and most dangerous position to be in.

Without effective and sustained measures to create new job opportunities, it is extremely difficult to justify, for example, the closure of the Consett steel-works in Durham. That is a closure which will have a devastating effect on a whole community within an area in which, no job opportunities are readily available. Challenged by the British Steel Corporation to break even by March 1980, Consett did just that. It may be that there are accumulated heavy losses and it may be that ultimate closure is inevitable, but in the present situation we should not underestimate the social as well as the economic damage that cannot be repaired by large-scale redundancy payments, which are themselves made at the taxpayers' expense.

It is not that the Government's general strategy or purpose is wrong but rather that it is being inadequately fulfilled. It is not a question of making U-turns but rather of responding to changing circumstances and the realities of economic life. I agree wholeheartedly with my right hon. Friend the Prime Minister that there can be no patent medicines and that there are no easy options. It is not a choice between inflation and unemployment. It is certainly true that if inflation is not curbed unemployment cannot be contained. Therefore, we must all recognise—th;s follows from what the hon. Member for Newcastle-under-Lyme was saying—that we must work together to solve this problem, accepting that the economy cannot stand another round of excessive pay increases.

In the context of this debate, it is sad that Mr. Len Murray should make another rather senseless speech on the subject this morning, saying that unemployment has no effect on wage demands—[Interruption]. The hon. Member for Aberdeen, North (Mr. Hughes) mutters from the Opposition Front Bench, but the fact is that we must consider this problem together. The trade unions have a part to play, as do the employers and the Government, just as the Opposition have a duty to be responsible in the national interest.

Therefore, public sector pay is an area in which the Government must set an example. They must lay down guidelines which, whether or not we like the words, are, in effect, an incomes policy for the rest to follow. In that I think they would be helped by saying "Thank you and goodbye" to the Clegg Commission and to Lord Boyle's Top Salaries Review Body. My right hon. Friend will have noted that the chairman of the Conservative Party in another place only a few days ago said that Clegg was a disaster and that comparability was a meaningless concept. There were some Conservative Members—more than 100—who suggested that the Clegg Commission might go the day after it had been appointed. It was once said that one man's pay increase was another man's price increase. What is truer today is that one man's pay increase may be another man's job.

I believe that managing the economy is a question of balance. The unanimous view of the summit conference in Venice was that we must somehow contrive to fight inflation without recession. That is not easy, but I do not believe that it is impossible, once one accepts that excessively high interest rates and a correspondingly distorted exchange rate neither automatically curb the money supply nor reduce the public sector borrowing requirement. Indeed, there is growing evidence to the contrary. I have argued it myself for a long time, and I was glad to see similar views expressed by Lord Lever of Manchester, among others, in the House of Lords recently.

The Government are continuing to borrow on terms which will cost generations of taxpayers thousands of millions of pounds a year more than it should or need. The annual amount of interest which the Government must pay on the national debt has, over the last 10 years, risen from £1,419 million to an estimated £9,885 million. It has risen most since 1974–75. The debt itself has risen from £33,442 million in 1970–71 to £95,327 million in the last financial year. That is about £1,700 worth of debt for every man, woman and child in the country. But in this context, and more significantly, the overall rate of interest for the same period has increased from 4·5 per cent. to 9·5 per cent. and is expected to reach 10·4 per cent. in 1980–81. That really does add to the PSBR and does not reduce it.

Meanwhile, industry is forced to go on borrowing at rates which cripple investment, productivity and profitability, thus aggravating the unemployment problem. So far as I can see, the only immediate beneficiaries are the moneylenders, who are allowed to act as though the word "usury" had never been invented. They are enjoying a euphoria unknown since the early days of Herbert Hoover and the so-called return to normalcy.

Perhaps I might recall a little more of the days of Herbert Hoover and add that it does an injustice to Professor Friedman to limit his doctrine to a theory about the necessity of controlling the money supply in all circumstances. In his book "Free to Choose" he not only points out that the banking crisis in the 1930s in the United States brought about the dis appearance of thousands of banks but adds: the total stock of money showed an equally drastic decline. For every $3 of deposits and currency in the hands of the public in 1929, less than $2 remained in 1933—a money collapse without precedent". As Friedman goes on to point out, that decline in the money supply undoubtedly made the economic collapse far worse than it would otherwise have been. He said that business failure, declining output and growing unemployment all fostered uncertainty and fear. In my judgment, we are heading that way today. If that calls for a change of direction, so be it.

If Governments refuse to adapt the means by which they seek to achieve their policies, they are called obstinate and arrogant. If they do modify their policies, they are criticised for making U-turns. To a large extent it is a Catch 22 situation. But I would say to my right hon. Friends, better by far to adopt the attitude of the late Sir Winston Churchill, who when charged with inconsistency said that his thoughts were a continuous and harmonious process.

A man who goes out on a sunny morning with a rolled up umbrella to use as a walking stick is not criticised for making a U-turn because he holds it up when the deluge comes in the afternoon.