Her Majesty's Government (Opposition Motion)

Part of the debate – in the House of Commons at 4:47 pm on 29th July 1980.

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Photo of Mr David Steel Mr David Steel Leader of the Liberal Party 4:47 pm, 29th July 1980

I shall not give way quite so soon. It was the chairman of the CBI in the North-West of England who said: The Government must have no idea what is happening to manufacturing industry, because if they did know they would care". Do they not know, or do they not care? The CBI in the North-West would certainly like to know the answer.

At one point at the end of the Vietnam war it was said of the Americans that they were creating a desert and calling it peace. I believe that there are certain parts of Britain where the Government are creating a desert and calling it freedom. There is very strong reaction in many parts of the country against the inaction of Government. The Prime Minister has again said today that it is not the Government's fault and that the policies are not deliberate. However, the effect of Government policy can be seen from a Government's inaction as well as directly from actions of Government.

I do not think one can possibly say to the unemployed teenager on the street corner "You have priced yourself out of the market", or any of the other phrases that trip from the lips of Government Ministers. As for the phrase "Let them move house", that deserves to go down in history along with "Let them eat cake" as a monumental irrelevance.

Of course there is a world recession, but in the face of such a recession it is the job of government to mitigate its effects on the country over whose activities and concerns they preside. After all, it was not the world recession which doubled VAT at a stroke, which decided to push up interest rates, which decided to increase prices in the gas industry or which decided to abolish development area grants in whole areas of the country. Incidentally, where that has been done, it has now been followed by guidelines—which in my view have not been given sufficient publicity—to the NEB and the SDA, which have now withdrawn promises of help to firms that were already in the pipeline. For example, there is one such firm in my constituency. That firm did not deal with what the Prime Minister called yesterday's jobs but with jobs on the frontiers of technology with which it may not now be able to proceed because the new instructions to the SDA have told it that it cannot go ahead and offer the help that had been agreed some time ago. In other words, there are deliberate policies of government which are inhibiting the development of the economy and of jobs in many parts of the country.

I believe that the root cause is that there is an in-built fallacy in the Government's economic thinking. I do not believe that there is any longer such a thing as the free market, either internally or internationally. Internally, the Government must cope with the fact that there are large sections of public enterprise and that there are large private combines, many of them international, which will take their business elsewhere if they find that other Governments are more sympathetic to industrial development.

There is also monopoly trade union bargaining power. All of those militate internally against the application of nineteenth century free market economics.

As for the international scene, many of our industries now find themselves having to compete with firms which locate themselves in other countries where Governments are either bearing the cost of research and development or their high technology or indulging in cheap energy policies. Let me take a specific case. The Government are faced with a plea for help from the Bowater paper-making plant in Ellesmere Port, in which 1,500 jobs are involved. But why is papermaking declining? It is because our competitors in those bastions of free enterprise—the United States and Sweden—are able to compete with us as a result of cheap energy policies.

Governments elsewhere are intervening like mad all over the place, while the British Government allow industry to sink or swim on its own, and many firms are sinking. That is particularly true of the textile industry about which the Prime Minister has heard a great deal from many hon. Members on both sides of the House. In fact, the Cabinet as a whole reminds me of those medieval philosophers who went around proclaiming that the world was flat, and when people told them "We are sorry to tell you, but it has been finally proved that it is not flat", their reaction was to say "Well, it damn well should be". That is the posture which the Government have adopted all along.

The alternative policy is to live in the world of reality and to accept that we are competing internationally in a world where other Governments do intervene in a variety of ways—intelligently and selectively—in order to assist the development of their economies. For our part, we would accept that there is a case for increasing the PSBR and for indulging in selective public investment for two purposes—to create jobs in the short term and investment in the infrastructure in the long term, because the two can be done together.

Let us take construction as an example. The construction industry is facing the most serious crisis of all. Employment has fallen dramatically, yet housing starts both in the public and private sectors are dropping. Insulation grants have been cut. Surely employment created through insulating homes is an obvious candidate for Government support at the present time, both because of short-term employment and the beneficial long-term effects on the economy. Even selectively, there are parts of the road programme—and I am not talking about prestige motorway developments—which are at present completely undeveloped. For example, the English motorway system is not linked to the Scottish motorway system in any way. There is potential employment there. The same applies to the railways. Why should we not allow the British Railways Board to construct and introduce more modern rolling stock as it wishes to, because that would be of long-term benefit to the economy?

There is also the Phurnacite plant in the coalfields of South Wales, where the Government have specifically refused to give the NCB the extra money for the new investment to replace that plant, even though 1,000 jobs are involved. It is a product which is widely used, both domestically and in industry, throughout the country. I believe that there is a case for selective public investment with these twin objectives.

If that is to be done without creating inflation, the Government must think again about a prices and incomes policy. I shall not repeat all that I said in our debate a week or two ago. I simply say that one sees, both in the Prime Minister's speeches and in the leaks to the press, that the Government are beginning to apply a selective pay policy only to the public sector. That cannot work, because people in the public sector will not accept restraint on pay if they believe that they are being discriminated against while the private sector is allowed to pay whatever it likes at any time.

The Prime Minister said that pay in the United Kingdom was going up twice as fast as it was among our competitors. That is true, but if one looks at most of our competitors one will find that in many different ways most of them have some form of incomes policy which applies overall. That is another area in which the Government will have to undertake a U-turn.

My third suggestion is that the Government must take action to cut the overvalued state of the pound. I suggest that they can do it in at least two ways—first, by reducing the minimum lending rate still further and, secondly, by looking again at the policy of issuing stock at fixed rates of interest into the next century. The present interest rate of 13 per cent. is well above the Government's own forecast of the rate of inflation. If that does not attract more money and push up the value of the pound, I do not know what does. I would have thought that the issue of index-linked stock would be far more sensible and would help to cut the over-value of the pound.

Fourthly, the Government should take direct measures to deal with the problem of unemployment among young people. A simple and not very expensive method would be to cut the employers' national insurance contribution for those employed under the age of 21, because the ratio of the contribution to wages is higher than among older age groups. I believe that such a policy would be justified and that it would give a stimulus to the employment of young people.

I also believe that the Government should be willing to embark on a more ambitious industrial training programme on a speculative basis, even if there are not the jobs to go to at present. The Leader of the Opposition was quite right to give specific examples from the steel industry. However, the same applies to many other industries as well. If the Government believe, as they do, that in time we shall come out of the recession, we shall need more skills, and we should be equipping our people and using our young people profitably and usefully by greatly expanding the training programme.

I do not despise the possibilities of a properly directed "Buy British" campaign. I think that people will respond to a positive lead of such a kind given by Government. If we are to have a "Buy British" campaign, it must be accompanied by legislation that requires goods to be labelled with the country of origin. The Government have been fiddling about for a year with a consultative document on the issue, instead of pressing ahead with it. I shall give the Prime Minister a personal example. With my 96 per cent. pay increase, I went to one of the summer sales and I bought the suit that I am now wearing. It is merely labelled on the inside with the washing instructions, the composition of the material and so on. It was not until I arrived home that I found on the inside of one pocket a tiny label saying that it was made in Yugoslavia. Surely, if people are to be motivated to buy British, there should be legislation requiring as clear labelling of the country of origin as there is for the washing instructions. It would not cost the Government a penny to bring forward that legislation, and they should do so.

I should like to press the Prime Minister and the Chancellor of the Exchequer on a question that was put by the hon. Member for Bolsover (Mr. Skinner). I, too, read the report of the speech of the Minister of Agriculture, Fisheries and Food in which he said that the direct cost of unemployment was £7 billion a year. Is that the correct figure? Does it include the supplementary benefit cost and the losses of tax income through wastage of people on unemployment benefit? What is the Government's estimate, not in human terms, but in financial terms, year by year, of allowing the dole queue to grow? It is essential that the House should be given more guidance, because it is against that cost that we can weigh the cost of some of the measures that some right hon. and hon. Members are advocating the Government should take to help cure unemployment.

I believe that one of the reasons for a public mood of despair—the Prime Minister should not try to convince herself that the public mood is anything other than one of despair—is that the process of industry is made the plaything of political doctrines. The Government are busy selling off bits of public enterprise to try to balance the books, leaving the less profitable parts in public hands. There is the constant argument "Let us push back the frontiers of State enterprise." At the same time, the Labour Party in opposition introduce an interim manifesto which proposes to introduce an enabling Act allowing Ministers to nationalise any industry by statutory instrument in order to push forward the frontiers of the public sector. Industry is caught in this perpetual argument about where the boundary should be drawn. We should concentrate on, and create conditions of, stability through the National Enterprise Board, with pragmatic decisions and through reform of industrial relations, aiming at making the private sector as profitable as possible, and the public sector as efficient as possible. If we did that instead of arguing about where the boundary should be drawn, and if we took ourselves away from the adversarial system of politics, I believe that industry would look forward to the future with a great deal more confidence.