Orders of the Day — The Economy

– in the House of Commons at 2:31 am on 23rd July 1981.

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Photo of Mr John Tilley Mr John Tilley , Lambeth Central 2:31 am, 23rd July 1981

I shall be brief, for two reasons. First, 18 of my hon. Friends have said that they wish to speak in the debate. I am sure that they will be with us shortly. Secondly, I and the whole House wish to ensure that the length of the Consolidated Fund Bill debate does not endanger the important business for tomorrow, namely, the debate on the Brandt report. The scope of the debate could cover development aids, as that is clearly part of the Government's economic policy.

Although the debate that I am initiating has a wide scope, the House will not have missed the fact that those who have said they wish to speak are all London Labour Members. We are concerned to show the effect of the Government's economic policy on the capital city and its inner parts, which are represented mainly by Labour Members. I intend to draw the attention of the House to only a few aspects of the Government's economic policy that concern my constituency of Lambeth, Central.

There is a parallel with the debate tomorrow on the Brandt report. Overseas aid and urban aid share the characteristic of being just enough to salve the consciences of the donors, but nowhere near enough to solve the problems of the recipients. That is true for my constituency, which includes a large part of Brixton.

We are told that the Government still have an inner city policy. The Prime Minister is fond of quoting how many million of pounds are going to Lambeth through the various forms of that policy. I think that all hon. Members who intend to speak will say that that money is not enough. There is no doubt that the Government's economic policy, and the deprivation that it has caused and intensified, was a major contributory factor to the various riots and disturbances that have occurred throughout the capital during the past few weeks, and in my constituency in April. While it is possible that police mistakes may spark off certain incidents—they may light the fuse—the explosive material was prepared by the Government. There is no doubt that the basic material of the explosions is youth unemployment.

It is an especially fitting time of year to discuss unemployment, because it is the end of the school year for the Inner London Education Authority. It should be the beginning of a new life, with new opportunities, for the youngsters leaving our schools. In reality, it is the end of hope and the beginning of despair. The figures that I obtained from the careers office in Lambeth on Thursday reveal the effect that the Government's economic policies are having on the young people who are leaving school at 16 years of age. There are registered as unemployed 1,245 in the 16 to 19-year age group. Of those, 924 are school leavers, in the sense that they have not had a job since leaving school. On Tuesday, the last day for which records were available, there were 13 job vacancies in the borough. For every 100 young persons who are unemployed in Lambeth, there is one vacancy for them to fight over. That is a graphic illustration of the position in which the Government have put those young persons as well as the entire community of Lambeth. If the Government do not act swiftly, further tragedies will occur. They will occur partly as a result of the economic policies that they seem determined to maintain.

Much has been said about the parallel between what has happened in our cities in the past few weeks and months and the events that took place in the inner cities of the United States in 1967. There is still one major difference. In the United States riots, 83 people died. No one has died in the disturbances that have arisen in Britain. However, I fear that that may happen if there are further disturbances. I fear that my constituents, or the constituents of my hon. Friends who represent other parts of inner London, will suffer, and suffer more than mere injuries, if there are further outbreaks of rioting.

It was clear that the Prime Minister's reaction to the first outbreak of rioting in Brixton was to punish Brixton. Her economic reaction was to say "If you give them the money when they riot, everyone else will riot". She punished Brixton economically. The rate support grant, which had already been cut, was cut yet again for Lambeth, and further constraints were put upon the council in its attempt to tackle some of the deprivation.

The Prime Minister's punishment did not work, because there were riots in many other places. It seems that the Prime Minister has found a new method of punishing areas where disturbances take place. The Secretary of State for the Environment was dispatched to Liverpool for two weeks. I read on the tapes tonight that he will stay for a third week. Presumably that is a warning to inner London that if there are any more riots in the area it will get him for at least a month.

The Government must be prepared to adapt their economic policy to the needs of the inner cities and to remove the deprivation. There is the risk that further disturbancies will arise if the deprivation is not removed. Yet the Government stick to their policy of attacking local authorities and cutting services in ways that will make the situation worse.

The issue about houses, health and social services and so on is not merely that they are needed by people in the constituencies that I and my hon. Friends represent, but that they provide a great deal of employment for the local communities. In my constituency, the biggest single employer is King's College hospital, which provides an important health service and also many jobs for local people, yet the Government are insisting on these cuts and on attacking the role played by the voluntary bodies in the inner city programme, which has been a new development in the last few days.

The startling document issued by the Secretary of State—I realise that the Minister cannot answer directly for it—in which he says that his officials will give special attention to vetting, monitoring and checking the activities of voluntary bodies, has created a great deal of distress in my constituency simply because we now find that those who care about the community and want to help are being rejected and are as demoralised and frustrated as the unemployed youngsters to whom I referred earlier.

The Government must consider a radical change and a radical reversal of many of their economic policies before they begin to destroy the fabric of society in a way that cannot be put right. It is not simply a matter of the Opposition hoping that those to whom we are least opposed in the Cabinet will win the battle at present going on. The Prior plan—the idea of a boost for employment creation—while better than the punitive attitude of the Prime Minister, is merely sticking plaster to try to mend the broken limbs in many communities and the economies of the inner cities. It is nowhere near enough, compared with what is needed. We need a massive transfer of wealth and power to the inner cities which I and my hon. Friends represent. We need a reflation, which I fear the Government will never produce, and which only a Labour Government can achieve. I and my right hon. and hon. Friends will work for that objective because that is the only real hope for the inner cities, which we hope to regenerate.

Photo of Mr Tom Cox Mr Tom Cox , Wandsworth Tooting 2:43 am, 23rd July 1981

Once again it is to the Consolidated Fund that London Labour Members of Parliament have had to turn in an effort to discuss the affairs of London. It is a disgrace to London and London Members that successive Governments have refused to appoint a Minister who has direct responsibilities for London. There is rarely a time when we are allocated a day and can discuss the affairs of London. We have Welsh and Scottish Question Time, and days for regional debates, but we do not have days for London debates. Until we have a minister with responsibility for the day-to-day affairs of our capital city, the problems, sadly, will increase. That is why I am sure that there are many hon. Members on both sides of the House who are prepared to join together in a determined effort to see that in the not-too-distant future there is a Minister who has direct responsibility for the affairs of London.

I note the comments made by my hon. Friend the Member for Lambeth, Central (Mr. Tilley). I am more than somewhat surprised that the Secretary of State for the Environment has to go to Liverpool. He could have got all his information about the problems of the inner cities here in London. He could have saved his time and train fare. If the right hon. Gentleman has taken any notice of what has happened during his time as Secretary of State, he must be in no doubt about the kind of problems that exist in London. When he returns from Liverpool, and if he is honest with the House and his collegues, I cannot believe that he will say that the problems there are any different from those in London.

There are many causes for the sad events of recent weeks. Without doubt, topping those causes is the Government's neglect of the major issues that face cities such as London. Employment, housing, social services, transport and the environment—all key services in a city such as London—have worsened in the last two years.

We all welcome the Chief Secretary to this debate on London—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I apologise for interrupting the hon. Gentleman, but this is not a debate on London. It is a debate on the Government's management of the economy. The hon. Gentleman must relate his remarks to that, because the Minister will not be able to answer specifically on London.

Photo of Mr Tom Cox Mr Tom Cox , Wandsworth Tooting

Thank you, Mr. Deputy Speaker. However, this debate will focus on the Government's economic record and its effect on London. I, and my colleagues, are merely trying to draw attention to the disasters of the policies pursued by the Department, of which the right hon. and learned Gentleman is a Minister.

We are not simply trying to attack the Government. What we have to say has been brought home to us week after week either in correspondence from constituents or by the delegations which complain bitterly about the effects that the Government's economic policies are having either on our citizens or on London. We are asking the Minister to justify the policies that have been pursued during the lifetime of the Government.

During the Government's period of office, I cannot recall receiving any letter or indication to the effect that our people are delighted with the Prime Minister's policies or that they have been of benefit to them. We are repeatedly told by the right hon. Lady that she supports the policies pursued by the Treasury, but none of us is in any doubt that she tells the Treasury exactly what it must do. Sadly, the effects of those policies can be seen all around us.

Unemployment in London has now reached 280,000 and it is going up month by month. Firms are closing, and little or no major industry has come into the area. As a direct result of the Government's economic policies, more and more people are leaving. Very soon the population of London will consist to a large extent of elderly people who, for one reason or another, are unable to leave.

Yet London, given the right kind of help from the Government, and especially from the Treasury. could become a major industrial area. There is land available for development. There is a work force. One of the great assets of this city is hardly used to the extent that it should be, namely, the River Thames, which could bring in and take out materials and equipment and add greatly to the wealth and the role of this city. But until the Government are willing to enter into partnerships with the Greater London Council and with the boroughs to establish industry, be it private or public or in the form of co-operatives, sadly, there will be very little progress. That is why we sought to have a Treasury Minister here today to outline to us, in view of the deep concern about this, what help is to be given in the coming months on the issues that I have described.

There are many other issues that deeply concern us. There is not only the question of employment. There is also the question of making cities such as ours far more attractive places in which to live. To me, the inner and outer areas of this city are a million miles apart. Those of us who come from the inner areas have enormous problems compared with those from the outer areas.

One of the great problems that we face is that of housing. The Government's cuts—again, forced upon the Department of the Environment by the Treasury—have been disastrous. Many local authorities cannot build, because they cannot get the money. Housing associations cannot improve properties that they already own because they cannot get the money. The financial cuts, which must total hundreds of millions of pounds, have resulted in more and more people living in deplorable accommodation when they had hoped, often for many years, that in the foreseeable future they would be able to enjoy a better place in which to live and to bring up their families.

One must ask the Treasury Minister here today whether the Government are satisfied, after two years, with their housing record in this city, be it in private or public developments. I am repeatedly asked at advice services and in correspondence exactly what is to be done about helping those people to find somewhere to live and to bring up their families as they would wish, and as I am sure that every one of us, if we were in a similar position, would seek to do.

The appalling effects of the Government's cuts in the housing programmes of the boroughs and of the Greater London Council have only just started to emerge. I shall concentrate briefly on their effect on the housing prospects of single people in London. I speak as a member of the all-party group of the Campaign for the Homeless and Rootless. As we all know, London's overall population will continue to decline. The number of single people needing housing and the number of one-person households will continue to increase. That is nothing new. That has been the pattern for over a decade. It is estimated that in 1986—in only five years' time—about 37 per cent. of all households in inner London will be single person or one-person family households. The Government, the GLC and the borough know that. The sad fact is that, despite that increase in that specific type of housing problem, the Government—because of the Treasury's restriction on such development—are not making the improvements that are desperately needed.

Another problem that is causing enormous difficulties is that of the single homeless. In every inner London borough this gives rise to great hardship and causes local authorities many problems. It is no good the Minister saying that such people must try to help themselves. According to figures that I saw recently, in the first quarter of this year a first-time buyer in Greater London needed an average income of £10,500 if he wished to get a mortgage. For many people, particularly the single homeless, that is out of the question. They simply do not have the money for the essential deposit. Sadly, in the past two years that problem has worsened.

Against that backgrond, are we expected to allow the problems to continue to increase? Is anyone in the Treasury given the job of adding up the cost of unemployment, poor housing and of yongsters who are in care because their parents are out of work or are unable to find the accommodation that they want? There are elderly people in our hospitals because local authorities are not employing the social workers who should, and would no doubt like to look after them. They would rather look after them than see them kept in hospitals because the necessary after-care services are not available.

In the London borough of Wandsworth there has been a deliberate cut in such services. When we have taken this issue up with the controlling local authority we have been told that it is subject to the restraints and cuts imposed by the Government and that it is not in a position to develop—even if it wished—the services that are urgently needed. One has to ask the Minister whether this is really part of the Government's economic programme and strategy. There cannot be anyone outside the House nor, for that matter, many inside, who see such action as meaningful, economic policy.

I believe that a great deal of employment could be created, which would bring great benefits not only to those who found jobs but to those who would enjoy services that urgently need to be improved in London. The list is endless. It includes housing, education, transport, social centres and industrial development. Yet hon. Members who question the Government are repeatedly told, especially by the Secretary of State for the Environmment, that cuts are needed. On seeking the reason, hon. Members find that this is the diktat of the Treasury.

Treasury Ministers must begin to understand that hon. Members have had enough of the policies that have been forced on us, the people we represent and the areas we represent. The Chief Secretary to the Treasury, who is to reply to the debate, was, some years ago, the Conservative candidate in North Kensington. I wonder whether he ever visits the area, walks around and sees the conditions that exist ther. Can he say, in all honesty, that the policies of the Government, of which he is a member, have produced benefits for North Kensington?

My belief is that we are at the crossroads. If, even at this half-way stage of their period of office, the Government are sincere about seeking to work with the Greater London Council, the boroughs and industry, there may be some hope. If, however, there is to be no change in the policies that have been pursued for the past two years, the outlook is sad and dreary for the people of London. I hope, therefore, that the Minister will say that there is an awareness of the problems to which my hon. Friend the Member for Lambeth, Central referred. My hon. Friend represents a constituency in the borough adjoining the borough of Wandsworth, part of which I represent, and which has suffered an overspill of some of these problems.

I hope that the Chief Secretary will say that the Government are aware of the damage and the dangers that the Government's policies have produced and that they will be changed. No one will be more pleased than Ito give a warm welcome, even to the Prime Minister, if a meaningful change takes place. If the Government state that they had gone too far, that they need to reconsider and to seek the co-operation of those who are essential to the well-being of the capital city of our great country, this debate will have been worth while.

Photo of Mr Christopher Murphy Mr Christopher Murphy , Welwyn and Hatfield 3:05 am, 23rd July 1981

This part of the debate relates to that most important of subjects, the management of the economy. May I therefore draw the attention of the House to how in particular employment is, and should be considered to be, a fundamental part of that management?

The Conservative Government came to power pledged to overcome inflation, and I believe that if they continue to carry out their policies firmly this objective will be successfully achieved. The Conservative Government also came to power pledged to encourage genuine new jobs, and I believe that, if they maintain their economic stance with conviction, this too will be successfully achieved.

Employment opportunities are largely dependent upon ending the inflationary spiral, and this must be at the heart of the management of the economy. Such opportunities will be expanded only by being competitive—producing goods and services that consumers want at prices consumers can afford, while realistically increasing productivity and reducing excessive wage demands.

Such a strategy inevitably, albeit unfortunately, takes time to come to fruition, and it is important that we should recognise that fact as we tackle the underlying economic malaise of our country. The Government are having to operate against the background of a world-wide recession, and with an inheritance of unsound money and a legacy of industrial unrest.

In looking at the management of the economy, I wish to refer to my own constituency, where after two years of Conservative Government around 95 per cent. of people in my local travel-to-work area are employed. This is the best level in Hertfordshire, the best level in the South-East, and almost the best level in the country. The Manpower Services Commission offices have filled well in excess of 10,000 vacancies in that period, and in the region of 400 jobs remain unfilled.

These achievements mask the additional difficulties resulting from a record level of school leavers, the increase in which has been over 1,200 in that same period. Further, the county has continued to see a substantial growth in population, which has added to the pressures for obtaining employment.

Clearly, whatever may he the problems of the management of the economy, Welwyn and Hatfield has been fortunate to have commerce and industry, both large concerns and small, determined to invest during the current difficult times in order to gain advantages in he near future. It has also been fortunate that the local work force has proved equally determined to be adaptable and responsive to changed circumstances. It is essential, however, to recognise that, even in a relatively prosperous part of the country, nobody can assume himself to be immune from the economic factors of life. In particular, young people are finding increasing problems in obtaining favourable career prospects.

As part of their management of the economy, the Government are providing very important assistance via the youth opportunities programme. This will continue to be of major significance in providing work experience and employment training for many school leavers in the short term. But I also believe that there would be considerable value in investigating the concept of finance going directly to employers to stimulate additional vacancies. The communiy enterprise programme for unemployed people of 19 and over is another key innovation to assist with measures of real benefit, such as the job release scheme and the temporary short-time working compensation scheme.

But there is a further development which I believe needs close examination, and that is the concept of national community service, which should be welcomed by parents and young people alike as a means of ensuring a more adaptable work force which also has more breadth of vision. That would mean the Government providing, perhaps for a 12 months period on leaving full-time education, a non-compulsory vocational opportunity for boys and girls to take part in developing social responsibility by giving practical help in our society, thus benefiting themselves and others. But it must be emphasised that such a scheme should in no way diminish the role and importance of existing voluntary service organisations.

In reviewing the management of the economy we should all recognise that, even with an upturn in the economic fortunes of our country, we shall continue to see the consequences of the new industrial revolution that is currently under way—perhaps, more accurately, it should be called the technological revolution. Equally revolutionary, therefore, may have to be the methods by which we adapt to an era of reduced employment opportunities, and, although problems of this magnitude demand answers with great understanding, I remain convinced that we have good grounds for optimism.

Photo of Mr Clinton Davis Mr Clinton Davis , Hackney Central 3:10 am, 23rd July 1981

It seems that the hon. Member for Welwyn and Hatfield (Mr. Murphy) is not familiar with the problems that we face in the inner city areas. Perhaps it is typical of the attitude reflected by the Conservative Government because they seem unconcerned about these problems—yet they are of national interest and it would be folly to ignore them.

It is an excellent feature of the debate that we have a Treasury Minister of considerable standing present to listen to the pleas being made by London representatives for the Government to change course with their inner city policy, if they have a policy at all. I hope that the Minister will be able to take heed of what is being said by a number of Opposition Members who represent deprived areas.

Photo of Mr Christopher Murphy Mr Christopher Murphy , Welwyn and Hatfield

I rebut the hon. Gentleman's suggestion that the Government are uncaring about the inner city areas, not least because of the action that they are taking. I had the privilege to represent the Conservative Party as a candidate in the East End of London in the seat of Bethnal Green and Bow and have, from first-hand experience, considerable knowledge of the difficulties in the inner city areas that have suffered from Labour Governments and Labour-controlled councils.

Photo of Mr Clinton Davis Mr Clinton Davis , Hackney Central

The hon. Gentleman did not do very well in Bethnal Green and Bow. Perhaps that was because he was making speeches such as the one we have just heard.

I assure the Minister that, while it is true that some responsibility falls on the shoulders of successive Governments, my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), in initiating the partnership schemes, broke through a whole area of neglect, realising that the inner city areas had to be rescued from the blight into which they were falling.

However, the position has dramatically worsened over the past two years. It is seen in our constituency correspondence and in our surgeries. The hopelessness and frustration are welling over in a tidal wave of bitterness among the young people in particular some of whom feel that they are unwanted by society, they are not cared about and are bent upon "revenge"—which is what one young black man said to me the other day in the midst of a disturbance in Hackney. That may be a misplaced feeling. I certainly do not support lawlessness and the sort of violence that has erupted in our inner cities, but we have to understand and to try to come to grips with the feeling permeating the minds of so many youngsters today, especially black youngsters.

Today, nearly 13,000 people in Hackney are unemployed. In May there were 10,780. It has been a rapid escalation. More than 14 per cent. of adult males are unemployed, and that is a percentage which has more than doubled over the past two years.

The figures of young people registered as unemployed on 9 July 1981—though not all were registered—were released the other day by the careers service, Hackney division, of the Inner London Education Authority. We have 1,464 youngsters between 16 and 19 years of age chasing 25 jobs, 21 of which are in the Barbican area, one in Hackney and three in Stoke Newington.

That is the measure of the problem with which the Minister has to grapple. He must also realise that the proportion of unemployed people amongst the black community is infinitely worse and that the position is deteriorating. Indeed, the unemployment position in Hackney is worse than it was at the height of the 1930s depression.

It cannot be argued, although I have no doubt that the Minister will so argue, that excessive wage demands are depriving people of employment opportunities. Male manual workers in Hackney are the lowest paid in London. We also have a large number of home workers who are appallingly exploited in the clothing and footwear trades and who eke out the barest living.

That is the reality, and this erosion of jobs affects all the substantial employers of labour in my constituency. Lesney Products and Co. Ltd.—Match Box Toys—Metal Box Ltd. and British Oxygen have all laid off workers on a grand scale, because all are effected disastrously by this Government's economic policies. Yet the mournful dirge that we hear from the Prime Minister every Tuesday and Thursday—except when she is not here, when we are somewhat relieved—is "Blame everybody else, but never blame me. I am immune from blame. It is the workers demanding excessive wages. It is the impact of world trade." It is this, that or the other, but never any fault of the Government.

Does the Chief Secretary accept any responsibility or blame for the deteriorating economic situation which has afflicted the country over the past two years? I suppose that we shall get more patronising lectures, more complacency, more Friedmanite dogma and more hypocritical claims of sympathy for the unemployed. It does not cost anything to offer sympathy. But we want action instead of the scorched earth policy being applied in the inner cities, especially East London.

I do not say that idly. The Government have ravaged the resources available to councils such as that of the London borough of Hackney. They assert glibly that it is a spendthrift council, and that excuses the reduction of expenditure by £17 million in 1981–82, with a further £2 million penalty likely to follow.

Let me acquaint the Minister with the facts of life afflicting this so-called spendthrift council. Our local resources are stretched beyond their limit. We have the largest housing waiting list in London, with 16,000 people. We have the worst overcrowding. We have have large numbers of people living in squalid bed and breakfast accommodation. We have the second highest proportion in London of children in care.

These are the facts with which we have to live. Members of Parliament have to live with them only in the sense that they try to help the thousands of constituents who write to them or come to see them in their surgeries. When the Secretary of State for the Environment thinks that he punishes the Hackney council, he does nothing of the sort; he punishes the 190,000 people who live there. He must come to terms with that situation.

The right hon. Gentleman went to Toxteth and said "I have not got an open cheque; I do not propose to throw money at these problems." I do not suggest that we shall solve these problems, even if substantial amounts of money are spent, in a short time. But, unless the right hon. Gentleman opens his cheque book, we shall not begin to solve them. The people of the shire counties, who have derived some benefit at the expense of London as a result of an act of political pillage, must recognise that they, too, are part of the inner city problems.

We need new initiatives to give new life and hope to places such as Hackney, not to squeeze life from those areas. That was the message of the present Minister of Agriculture, Fisheries and Food some years ago. But it was more than a message that came from my right hon. Friend the Member for Stepney and Poplar, because the partnership scheme that he initiated was capable of bringing new life to the London borough of Hackney. Unless such help is provided now, the local authority can only mitigate the worst features of the blight to which I have referred.

The London borough of Hackney has been trying, with its hands tied behind its back by this Government, to involve the community in a number of new schemes which will involve the community in directing those schemes in large measure.

There are two joint venture schemes being developed: a city technology centre, and a fashion centre. Both await approval by the Department of the Environment. If they are denied that help—as seems likely—they will be able to proceed only by assistance through the urban aid programme as non-statutory sector projects. They would have to do that through the Hackney business promotions centre setting up two subsidiary limited companies and then making the application. A relating minor cost is involved, but the Secretary of State would say that Hackney was being spendthrift.

Many additional emergency proposals have been suggested by the council. I recite them from a submission that has been made to the Association of Metropolitan Authorities by the chief executive of the London borough of Hackney. The first is: Relieve designated inner city partnership and programme areas of the imposition of formula rate support grant penalties"— that is an absolute prerequisite 2. Restore full urban programme status to Lambeth and Hackney;3. Target section 11 grants"— under the Local Government Act 1966— in our direction and urgently revise the criteria;4. Give us designated authority status for derelict land grants;5. Give us a bigger share of MSC funding and revise the rules, as suggested, particularly to cover more extended apprenticeship schemes. My goodness, how we need apprenticeship schemes in Hackney. They have largely disappeared over the years.

Instead of a positive response from the Prime Minister, we are told that it has to wait until we have the CS gas, the plastic bullets and so on. What a miserable response. I cannot help contrasting it with the response of President Johnson in 1967 when he was faced with infinitely worse problems. He said in his address to the nation: The only genuine, long-range solution for what has happened lies in an attack—mounted at every level—upon the conditions that breed despair and violence. All of us know what those conditions are: ignorance, discrimination, slums, poverty, disease, not enough jobs. We should attack these conditions—not because we are frightened by conflict, but because we are fired by conscience. We should attack them because there is simply no other way to achieve a decent and orderly society in America. Why could not the Prime Minister, why could not a single Minister from the Treasury Bench, have responded in like terms to the problems that are imposed upon us now? They have significantly failed in that respect. Instead we get the nauseating response of a purblind Prime Minister who challenges the Leader of the Opposition to say whether he supports the use of CS gas.

We have to do much more than just the emergency programme I have outlined. We must also do something about the minds of people. When I hear the voice of hate, illustrated by the right hon. Member for Down, South (Mr. Powell) the other day, which reflected no more and no less than the cattle truck mentality, when he gives respectability to the odious forces of hatred that parade themselves on the streets in East London, one realises how serious a matter this is. All of us in this House must join in rebuking the voices of hate.

Equally, we have to avoid taking a path of blind coercion in answer to the lawlessness that has stalked our streets over recent weeks. Repression and lawlessness thrive on each other. Both of them represent a challenge to our democracy—which we should nourish and cherish—and both of them play into the hands of those whose voice is the voice of hate and whose psychology is that of the cattle truck.

These are the people who search for scapegoats and talk about CS gas and rubber bullets. That is wholly irrelevant to the problems we face day in and day out in London. We need to foster co-operative ventures, and we need to provide real help for ethnic minority businesses, which play a part in our society. We hear a great deal about support for small businesses from the Government. There is a problem of how to get finance to these beleagured businesses.

We have to do something about rebuilding apprenticeship schemes. The London borough of Hackney is trying to work out a pilot scheme with the GLC that will provide nine or 10 places. That is a very small response to a major problem. Unless the Government are prepared to intervene and provide us with assistance and bear the main burden we shall not get much more than that scheme off the ground.

I share the view expressed by my hon. Friend the Member for Tooting (Mr. Cox) that it is absolutely right that those of us who care about the problems of inner London should have taken this opportunity to get a Treasury Minister to become acquainted, for the first time, with the facts. Perhaps the right hon. and learned Gentleman was a candidate for North Kensington some time ago. I hope that he still cares about the problems of North Kensington and I hope that he will do more than just show care. I hope that he will show, although I doubt that he will, some positive assistance to relieve the thousands of people in inner London who have to live with these problems day in and day out.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Before I call the next hon. Member, I should say, once again, that this is not a debate on London and it is unfair to expect the Minister to answer questions about the problem of immigration or anything of that kind. The debate must centre around what has been balloted for, and that is the Government's management of the economy.

Photo of Mr Stuart Holland Mr Stuart Holland , Lambeth Vauxhall 3:29 am, 23rd July 1981

The state of our economy is well recognised to be chronic. Unemployment is on trend for 3 million, youth unemployment is higher than at any time in the 1930s and inner London has more unemployed than the whole of Wales—classically considered to be a problem region of the economy. What we are seeing is part of a wider problem of more and less-developed regions in a capitalist economy which is in crisis. We are dealing in the London context with a city region. Just as in the post-war period we have been trying to offset and remedy the problems of less-developed regions as a whole.

The tragedy is that, as a result of the Government's policies, the whole country qualifies as a less-developed region of the European or world economy. The point has been well made by some of my hon. Friends that real wages in Britain, far from being the cause of the crisis—as is claimed by Ministers—are virtually the lowest in Europe. The rate of capital accumulation in this country has slumped and we have seen a collapse of manufacturing investment with a net decline of up to one-tenth a year for several years, resulting in the inglorious present situation that the level of manufacturing investment is approximately that of 1968.

Part of that reflects a decline in the base of traditional industries in the economy. That is indubitable. Part reflects the lack of new modern industries and, in particular, new investment in what have been the modern industries of the past 10 or 20 years.

A further factor is certainly the outflow of capital from this country, and yet another is the new technological unemployment that we face. That is having an impact on services as well as industry. For the first time, service employment, in both the private sector and the public sector, is in net decline.

Let us take account of new technologies, such as those based on the new generation of mini-computers, word processors and data processors. We can no longer rely on service employment absorbing those who have been displaced by technological progress in manufacturing. The forecasts are extremely dire in this country, France and Germany. Authoritative reports from the Manpower Service Commission, the Nora report in France and the Siemens report in Germany forecast the possibility of between a 30 per cent. and 40 per cent. decline in office, clerical, data processing and related staff in those countries over about 15 years.

A report prepared for the Central Policy Review Staff in 1978 forecast that if available robotics are introduced widely in industry Britain could within 30 years be producing all its future material needs with only 10 per cent. of the existing labour force—a prospect of up to 90 per cent. technological unemployment.

That is a scenario of the possible, not the certain, but it is also a scenario of the wholly unacceptable. It is likely, even if it occurs in a modified form, and we see increases in unemployment of 10 to 15 per cent. on top of present levels, to aggravate the grave social tensions that our society and economy are already suffering.

The main factor in the level of unemployment and the main reason for such substantial unemployment in Britain and its inner cities is Government policy. The Government still do not seem to have learnt that, contrary to Tory myth, public spending does not drain the private sector, but sustains it. We have not heard a reasoned case from the Government Benches on this subject, and I am glad that the Chief Secretary to the Treasury is present. I hope that he will reply to the issues that. I have mentioned.

Conventionally, public expenditure is expressed as some 50 per cent. of total spending in the economy, but that 50 per cent. normally expressed against gross domestic product includes 20 per cent. of the total which is a transfer payment—mainly social security payments, but also the important category of aids to industry and to agriculture. The real public spending figure and the real claim on resources—a phrase much favoured by monetarists—is not 50 per cent., but 30 per cent. of total spending. Even in that category, two-thirds of that spending is in effect a transfer payment. That is not stressed in much conventional reasoning on the economy, but it is important to develop the point and get it across to some Conservative Members.

While public spending is nominally 50 per cent. of GDP, public enterprise in the economy is only about one-tenth of GDF. That means, in practice, that whether the public spending takes the form of social security benefits or spending by central Government or local government on capital projects or wages and salaries, on average nine-tenths will be spent in the private sector rather than in the public sector of industry. Even making allowance for the fact that the figures that I cited on the public sector include the main nationalised industries rather than para-governmental organisations, it is clear that, on average about £85 in every £100 spent in public spending benefits and thus sustains private spending in the economy.

Moreover, the very factor which the Prime Minister time and again claims to lament in Britain—the rise of public spending in the post-war economy—has sustained rather than drained resources. We have heard much about Milton Friedman, Nobel Prize winner. We hear less, for example, about Sir John Hicks—as it happens, also a Nobel Prize winner, not one of the more radical Keynesian economists; a cautious man, not given to exaggeration. When he tried to explain the dampening of economic cycles in post-war Britain relative to the 1930s, and why we had not again entered a slump syndrome such as we witnessed and suffered then, he stressed that the main difference had been the rise in long-term investment and capital expenditure projects, especially in the public sector. Short-term reactions to income changes of an accelerator or decelerator kind constitute the main mechanisms of the private enterprise trade cycle. But public spending—until this Government took office—was not directly influenced by short-term changes in the expectations of private entrepreneurs or private managers, and therefore permitted the long-term accumulation of social overhead capital and economic resources in the economy.

A further point of considerable significance to what the Government are doing relates to another basic mechanism in the economy—the multiplier mechanism. Public sector multipliers, whether they are on income, employment or investment, are higher than private sector multipliers. I hope that the Ministers will address themselves to what I am saying, rather than have it pointed out to them by officials afterwards in Hansard, since it crucially affects the issues in this debate.

Public sector multipliers, that is, the multiplication of income going into the economy from public spending, being higher than the injection of income from private spending, inversely means that with public expenditure cuts, the contraction of income in the economy is also considerably higher.

The CBI, concerned with the level of interest and exchange rates, has until recently been asking for further public expenditure cuts. There have been qualifications, but there is still pressure on the Government, especially from small and medium sized enterprises, which do not recognise that they are the main beneficiaries of public spending in the economy.

I shall give a specific example which is directly relevant to one of the gravest social problems facing, for example, a city region such as London. In London nearly 500,000 homes are recognised as being unfit for human habitation, lacking basic amenities or in need of major repair. Nearly 500,000 construction workers are unemployed in the country as a whole. The Government say that they cannot afford public spending on housing because that would take resources away from the private sector. Who builds council houses? According to a reply to a question tabled to the Secretary of State for the Environment, in England and Wales 93 per cent. of council houses have been built by private rather than public enterprise in the last five years.

In practice, it is improbable that the logic of this argument will penetrate the Government Benches. But for every £100 of public spending cuts in council house building, in England and Wales, on average £93 is taken out of the private sector. That means that £93 is drained from the private sector because of public expenditure cuts.

The argument is common sense to anyone who looks dispassionately at the case, but has not gained acceptance within the Government or the Cabinet. Perhaps it will gain acceptance as the small and medium sized firms in the construction industry suffer a chronic collapse because of the moratorium on council house building.

A further factor in the Government's justification for not being able to spend resources and thereby generate new jobs and income in inner cities or problem regions is, allegedly, the link between money supply and inflation. One of the oldest arguments in economic theory is that too much spending causes inflation—that excessive spending causes price inflation.

The argument has to be related to two factors. They are basic Keynesian arguments. One is the level of transactions in the economy and the other is the velocity or speed of the circulation of money. Keynes stressed the importance of the level of transactions because if people had reduced incomes or if they were apprehensive about economic circumstances they could tend to save rather than spend money. We have seen that phenomenon in Britain in recent years, with high savings ratios combined with inflation.

The irony is that Milton Friedman, flying back from receiving his Nobel Prize and stopping off in London, was able to say on television that inflation starts in one place and one place only—national treasuries. When faced with professional argument on the relation between money supply and prices, he gives a different answer. It is to be found in the proceedings of a debate between Milton Friedman and James Tobin in the United States. When challenged on his facts and figures, Friedman said that he was not claiming that increases in the money supply accounted for more than about half of the increases in prices in the economy. "About half" is not the sort of message that we have recently had from Government Ministers. "About half" would mean, in effect, that if the Government attach importance to money supply, especially public spending, as a cause of inflation, they could have had only half the public expenditure cuts in the economy without any net loss in the price index or inflation. It is staggering that any modern Government should accept the simplisms of monetarism in the way that this Government have.

There are many factors in inflation. There have been commodity increases, oil price increases, wage increases, cost increases, the cost to the domestic economy of the dramatic devaluation of sterling in the mid-1970s and other factors. But one factor that has been neglected by the Government is monopoly pricing. The trend to big business is now so marked in the British economy that when only two or three firms dominate any individual market they can, to a considerable extent, compensate for falling sales by raising prices.

That mechanism takes account of the external factors in the inflationary process, and the extent to which those factors must be absorbed. In the 1930s monopoly concentration in industry was about only 20 per cent. rather than half as it is now. Whereas in the 1930s sales fell but prices fell faster than sales through the decade, we are now seeing sales falling and prices increasing. It is an element that makes it imperative that the Government should not only reflate public expenditure in the economy, but adopt a policy of price controls for the new monopolistic leaders in British enterprise.

We can spend our way out of the slump. But, with the shattered expectations of business because of uncertainties caused by Government policy and domestic inflation, we must ensure that as the economy recovers big business does not simply pocket the revenue generated by the spending in the form of higher prices rather than reduce prices as its unit costs are reduced by higher sales.

We are told by the Government that foreign trade constraint is a reason for our not being able to have public spending. But two-thirds of our trade is dominated by multinational companies. About 220 companies represent two-thirds of our visible export trade. Nearly all of them are multinational in operation. They produce in different countries rather than simply export to them. The old international division of labour between different firms in different countries has given rise to a new multinational division of labour between the same firms in different countries. In effect, they have become their own competitors abroad and are unlikely to follow through exchange rate changes on foreign markets even if the Government manage to maintain sterling at its now relatively low level.

Some firms will benefit from a relatively low exchange rate. They are the 10,000 regular exporters in the economy that are mainly national rather than multinational. They mostly export goods rather than enterprise. But they represent only about one-third of our foreign trade. The Government can hardly rely on exchange rate changes to promote recovery and claim that only when we have that recovery in foreign trade can we afford public spending.

Also, if we are talking about foreign constraints, what about the outflow of capital from this country? We have Ministers going to inner city areas in Liverpool and saying that they cannot open a cheque book and spend money to solve the problem. What about the £1 billion every three months that leaves the United Kingdom in the form of capital outflow following the abolition of exchange controls by the Government? Can the country afford that? It says we cannot afford the spending in the domestic economy, yet it can afford to lose about £4 billion a year on capital outflow as a consequence of the abolition of exchange controls by the Government.

Further, and perhaps most importantly, while other countries have a major energy constraint and are limited by that in increasing public spending, Britain is the only industrialised country with self-sufficiency in energy, whether in oil, natural gas or coal. Japan has an energy constraint. It is 95 per cent. dependent on imported energy. Germany has an energy constraint. It is 85 per cent. dependent on imported energy, as is France. But Britain is not. We have major resources in energy as in skill and technology. This country is either at the technological frontiers of new discovery or within reach of them. In many instances it is ahead of the world. There are no necessary constraints for a recovery of public spending, and this spending would generate jobs and incomes in not only the public sector but in the private sector.

It is striking that the Prime Minister can return from Ottawa convinced that everything that she has heard confirms her view that what she now calls the middle road monetarism of herself and Chancellor Schmidt is accepted by the world leaders. She managed to refer to the nuclear weapons policy of the new French Government of Francois Mitterrand and the Socialist Party but not to the fact that the French Government totally reject the basis of the economic policy that the British Government are pursuing. The French Government are basing their policy on a reflation of spending, a restructuring of industry and a major redistribution of resources. That is a redistribution, whether between social classes or between inner city areas and other regions, that the British Government should be undertaking.

My constituency is part of the borough of Lambeth. It has about 15,000 unemployed people and there are about 15,000 on the housing waiting list following a period of council house sales in outer London and following the moratorium on council house building. Male registered unemployment is 15 per cent. in Lambeth as opposed to 9 per cent. for the GLC area as a whole. Unfilled vacancies have risen by 50 per cent. since June 1980. The unemployment to vacancies ratio, which in June 1980 was 11:1, has soared fourfold to nearly 40:1. We have had a 15 per cent. increase in youth unemployment since June 1980 and disabled unemployment is especially high.

The problems which these factors cause have been argued in the House by some hon. Members to relate to ethnic minorities in the community and to the problem, though the right hon. Member for Down, South (Mr. Powell) did not dare speak its name, of race.

The fact is that registered unemployment rates for black and white people in, for example, Brixton are far higher than for London as a whole. We have considerable unemployment among black people. In Lambeth black unemployment amounts to about 7 per cent. of all black unemployment in London compared with about 10 per cent. in Brent and Ealing and 8 per cent. in Hackney. Those are areas in which there have recently been grave civil unrest and civil disturbance.

When the right hon. Member for Down, South claims that the ethnic minorities alone cause that problem, he fails to recognise the relationship between high unemployment and grave civil disorder, which characterised the 1930s, in particular in Germany. It is elementary in modern historical analysis that there was a correlation between the rise of the Nazi party in Germany and the rise in unemployment. Shortly before the Nazi seizure of power in 1933, both unemployment and the vote for the Nazi party fell. While one cannot generalise and say that there is a one-for-one relationship anywhere, the most notorious case in recent modern history shows that there was a correlation between unemployment and the rise of the Nazi party, even though the Nazis themselves claimed race to be the problem.

It is scandalous that during our recent debate on civil disorder the right hon. Member for Down, South refused to allow more than one or two interventions—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

The hon. Member is going wide of the debate on the economy. He must return to that subject.

Photo of Mr Stuart Holland Mr Stuart Holland , Lambeth Vauxhall

With respect, it is important to my argument that when the economy already is in a major crisis, and with the prospect of a rise in technological unemployment, we are likely to face grave civil unrest. The counter argument put by the right hon. Member for Down, South is that the grave civil unrest is the result of ethnic minority problems. In crude terms he is saying "We have seen nothing yet." But in a debate on the economy the House should consider the arguments anticipating grave civil unrest because of rising unemployment rather than race.

It is tragic to find the oversimplification of the arguments which we have had recently from Members such as the right hon. Member for Down, South. He also has made false claims about the immigration policy of the French Government and thus misled the House. I shall not go into detail on that, but those who wish to see how unfounded his statements are should refer to reports of the debates in the French Assembly on unemployment and immigration of either 9 July or 14 July, where the record is put straight and where the situation is wholly different from that argued by the right hon. Gentleman.

What are the Government planning to do about the incidence of unemployment in the areas of the economy where it is gravest? In inner city areas there is a programme of further cuts in rate support grants and penalties on councils such as Lothian—the staggering sum of over £50 million. There is an anticipated further cut in the rate support grant for the London area as a whole of about £240 million to £250 million—again, a staggering sum. There is also a shift in resources from inner city areas to the shires. Yet it has been known for years to all those interested in the area—other than Government Ministers—that the cost of social facilities and their provision, such as building and construction costs alone, in an inner city area, can be three to four times the cost of their provision in a suburban area.

We thus need more spending, and rate support grant for that higher spending in inner cities because of their structure—in part due to congestion costs—irrespective of social factors. By cutting public expenditure in the inner cities, the Government are taking resources away from areas of multiple deprivation.

The housing programme is an example. The Government are cutting the housing investment programme in London at a time when the inner city areas of London need more rather than less housing expenditure. The argument is relatively simple. Many estates in constituencies such as mine were built in the 1930s and 1940s. They are now coming to the end of their natural life cycle. In other words, instead of needing further repairs to a roof or the clearing of a drain, they need new roofs, new drainage and internal modernisation and improvement. When the Government cut resources from the housing investment programme, they end the possibility of a cycle of housing renewal in such inner city areas. That poses grave problems for inner city boroughs and throws their housing policy into crisis.

The Government's offer to areas of high unemployment in the inner cities is enterprise zones. When the concept was introduced in the House, the Chancellor of the Exchequer cited Professor Peter Hall of the university of Reading as having created the scheme. He also asked why we could not create Hong Kong in Glasgow or, presumably, Singapore in Streatham. The reason why the Government's policy is so unsoundly based in that respect is that we cannot do so unless, as in Hong Kong and other South-East Asian countries, we have wages that are a quarter or a fifth those in Britain.

That cannot be done unless you want virtually no social services or welfare society; virtually no public health service; virtually no trade unions or genuine trade union rights; or a 50-hour week or more, as is the case in Hong Kong and Singapore. That would worsen unemployment outside the enterprise zones, especially in a period of rising technological employment. It also cannot be done unless you want to consider the employment of child labour, as is still notoriously the case in Hong Kong—a Crown colony—and unless you also want to consider—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I do not want to consider any of those things.

Photo of Mr Stuart Holland Mr Stuart Holland , Lambeth Vauxhall

I apologise, Mr. Deputy Speaker. It cannot be done unless Ministers wish to consider police repression, as is the case in South-East Asia and Latin America, bordering on Fascism. That was recently cited in a report in The Guardian on Hong Kong, where in cases of civil disturbance the police shoot first with live ammunition and ask questions afterwards.

Tragically, while most people in their right mind would dismiss such options—either in respect of inner city disturbance or direct or indirect repression on wages or labour—as a response to economic crisis, it appears that this is the road down which the Government are going. Their increased expenditure centres almost exclusively on the police and armaments.

What is the feasible way out for the Government in relation to the economy? First, they must reflate the economy, for the reasons that I have given in relation to the fact that public spending sustains rather than drains the private sector. Secondly, they must reverse the cuts in rate support grant in inner city areas because, again, the spending generated by rate support grant benefits directly those receiving the income and indirectly those who receive it when it is spent. Thirdly, they must face the issue of capital outflow—the £1 billion per quarter, or £4 billion per year, going out of this country at a time when we are told that we cannot possibly have as much as £1 billion reflation—which is only one-half of 1 per cent. of national income—for the regeneration of inner city areas and problem regions.

In addition, we need homes and housing programmes, not office development. I have given the figures on this. In London alone, nearly ½ million houses are in need of repair and modernisation while nearly ½ million workers are unemployed.

A further factor should be considered by the Government and may I believe, shortly come before the House. Instead of a policy of enterprise zones, instead of trying vainly to recreate the conditions of exploitation obtaining in some less developed countries, the Government should support those councils which wish directly to intervene in the economy through municipal enterprise. This mechanism has major potential for the regeneration of employment in inner city areas.

In this context, there are councils such as Sheffield which are interested in the extension of municipal enterprise agencies, and in London there is the Greater London Enterprise Board. Given the powers, and a clear endorsement of those powers by the House, that board could be in a position to spend £200 million to £300 million per year in the Greater London area within two or three years. This would be on direct job creation schemes, overcoming some of the problems of small and medium sized enterprises which are so gravely afflicted by the economic crisis—that is to say, the firms which not only find themselves squeezed by larger enterprises in the system but which have not the export ability or organisation to penetrate foreign markets in a period of intensified economic crisis.

The enterprise board proposals made by the current Greater London Council administration include the provision for direct municipal enterprise, that is to say ownership of an individual company by the council's enterprise board. They also include provisions to promote co-operative development. In addition, there are provisions to assist private enterprise where the private sector cannot help itself—for example, in the promotion of exports in foreign markets. This would be by joint export representation of small and medium sized firms which cannot themselves afford representation in markets such as Scandinavia, Latin America and elsewhere.

If the Government will not change their minds on other issues, I hope that they will at least be prepared to give a different response when these proposals are more widely argued, and when the GLC may wish to come to the House for wider powers. If they do not give those powers and support positive initiatives of this kind while intervening negatively in response to economic and social crisis in the inner city areas, they should not be surprised if the reaction to the slump syndrome in this country, to which they by their own policies have contributed so greatly, is the aggravation of grave social tension in the country as a whole.

Photo of Mr Ronald Brown Mr Ronald Brown , Hackney South and Shoreditch 4:10 am, 23rd July 1981

My hon. Friend the Member for Vauxhall (Mr. Holland) has pinched half of my speech. Although I supoort his view of the enterprise boards, many of the London boroughs have already started to do a great amount of work in this area. Many of the business promotion groups such as we have in Hackney have done a great deal to recover as much as possible from the disasters that have befallen us since the Conservative Party took over n 1979. We should pay tribute to such work.

From time to time, Mr. Deputy Speaker, you have pointed out that this is not a wide-ranging debate, but London has one-sixth of Britain's population, therefore, not surprisingly, it plays an important part in our economy. We welcome the Chief Secretary to the debate. In previous debates we have been given the monkey rather than the organ grinder. We now have the organ grinder with us and we are looking forward to great things from him. Inevitably, other Ministers have argued that if only they had control of the Treasury they would help us out. As they have had only a certain amount of money, they have said that it was a case of transferring money from A to B, and B to C. Somehow, London has always been the loser. Therefore, we are delighted to welcome the Chief Secretary to the debate. We expect great things from him. His view should be clear.

The rate of unemployment in London is unacceptable. This evening's edition of The New Standard illustrates that point. It states: In London alone 12,330 teenagers are chasing 761 job vacancies". No one in his right mind would regard that as acceptable. We are told that unemployment stands at 2,800,000, but, we all know that that is a fraudulent figure. The real figure is 3 million or more. The statistics for June have been read out. They show the number of those who have not reregistered. Therefore, we know that the figure is much nearer 3 million.

Things would not be so bad if I thought that the Government had some strategy and that unemployment fitted into some future grand design. However, the Government are destroying not only jobs but whole industries. The textile, clothing, footwear, and furniture industries are in trouble. I have had each of those industries in my constituency. I have spent the last two years doing the round of Ministers, pointing out that each of those industries was fading away. Ministers are very kind and helpful, but they say that the Treasury controls the money and will not help. I hope that the Chief Secretary will tell us his strategy and why the destruction of the textile, clothing, footwear and furniture industries is part of the grand design.

According to today's edition of the Financial Times, the Prime Minister addressed the 1922 Committee last night and said: I still believe we will be successful in our economic and other policies, but it is now or never, and we must go through with it". I do not know what "it" is. If that means destroying industry after industry, the right hon. Lady has mislead herself and the 1922 Committee by saying that her policies will be successful. She then said: I believe we are coming through it now". What is "it"? I know which part the right hon. Lady is coming through. I also know what is happening, from one end to the other, in Hackney. The situation is disastrous. Is that what she means by I believe we are coming through it now"? In a pertinent phrase, the Prime Minister was reported to have said: Next year we will see an improvement. The right hon. Lady has been saying that since 1979. I recall appearing in a television programme in 1979, a few days before the election, together with the hon. Member for Basingstoke (Mr. Mitchell), representing the Conservatives, and Baroness Seear, for the Liberals. There was a hand-picked audience of 400 of all the political parties. I took the opportunity to describe what I thought would happen in the event of a Conservative victory. I am scandalised when I think of the outrageous predictions that I made. The hon. Member for Basingstoke was most upset.

I told the audience that by 1980 there would be 2.5 million unemployed. One could hardly imagine a more unreasonable and disgusting remark. I also said a most disgraceful thing—that by 1980, VAT, then 8 per cent., would have been increased to 15 per cent. I predicted increases in the price of tobacco, beer and spirits, rent and rates, electricity, gas and water. The hon. Member for Basingstoke upbraided me for making these outrageous and totally untrue allegations. My reply was that £4,000 million could not be given back to taxpayers without taking such action. The hon. Gentleman described my view as nonsense. The tax reductions, I was told, would provide a great incentive and the Government would be heading hell-for-leather towards growth. I replied that his view was nonsense, but he was adamant. The electorate bought the hon. Gentleman's story rather than mine.

I cannot today accept the recession argument. The hon. Gentleman was anxious to inform me during that television programme that there was no such thing as recession. I was accused of always finding fault and describing anything that happened to go wrong as a recession. I do not understand, therefore, what the Prime Minister means when she talks about the problem of recession. According to her acolytes at the time of the election, there was no recession. It is no worse now than it was then.

Hon. Members are entitled to be told why people were misled in 1979. Those who forecast what would happen up to 1981 were described as tellers of untruths by Tory pundits at the time. An explanation is required when it transpires that we were right and they were wrong. The Treasury is leading the attack on the fabric of society. Its attack is based on a wish to get rid of the Welfare State that has existed since 1945. There is no house building in Hackney, despite a waiting list of 16,000 families. People are told that they must look after themselves. The Government seek to establish the concept of the shorthold, the equivalent of the old furnished tenancies of past years.

People are also told that they cannot receive a pill for every ill and that they must look after their own health. For those who cannot afford to pay, there will be the infirmary. For those who are hungry and have no money, there is the workhouse—except of course, that there is today no workhouse. Two weeks ago a massive queue of 500 people formed in Hackney. I asked the photographer from the local newspaper whether he would care to take a photograph of the queue and publish it alongside the photograph of the Conservative election poster of 1979, for which hundreds of actors had to be paid because there were insufficient unemployed wanting to be paid. They were able to get actors to do the job. But on Friday a week ago there were 500 people there who were not acting. They were genuinely unemployed.

Why were those people queueing in Hackney outside the town hall? They were there because of the refusal of the Department of Employment to pay them their unemployment benefit. The Department of Employment sent them to the Department of Health and Social Security. When they went to the DHSS, they found that they were not to be paid there either. They were finally forced to go elsewhere to try to find some means of support. It was only because we were able to intervene and get the local authority to come to the aid of those people that they got any money. I pay tribute to Hackney council. This very day claimants are obtaining only a proportion of the money to which they are entitled.

I hope that we shall hear from the Chief Secretary what money he is making available for those people to be properly paid, because they are entitled to have their full benefits, which they are not getting. Rather than tell us a long story about how inflation has got to be reduced, he must tell us exactly how people are to live. There is no point in having long discussions about the state of the country and what causes civil turmoil if the Government deliberately go about creating the circumstances that bring it about.

Young people leaving school today want jobs, but what has the Treasury done? It has decided that they cannot sign on at the employment office until after 7 September. The theory is that it is possible that they will deliberately leave school today, sign on for benefit until 7 September and then return to school. I do not know what the Treasury believes it is doing, but in Hackney I have been to the headmistresses and headmasters of the schools, who tell me that many of the young people left school at Easter in order to beat the ban that was put on them to stop them claiming their benefit. The result was that those young people failed to obtain their O-levels and A-levels because they left school before they should have done in order to obtain their benefit from the employment office. Those who have not left will not be able to get a job, nor will they be able to get any sort of subsistence. The numbers of unemployed in Hackney are very high, and even when the unemployed were in work their earnings were very low.

There are now large numbers of young people roaming the streets, with no means of support. I wonder what the Chief Secretary thinks will happen. Does he need it to be spelt out for him before he can understand the sort of thing that will be brought about by this policy? I find it impossible to understand the mentality. It is no good claiming that it is only the minutiae or that it is somebody else's responsibility—that it is the responsibility of the Department of Employment or of the DHSS. It is the Treasury's responsibility, since it has drawn up the grand design and fitted everybody in.

When I hear about the Secretary of State for the Environment going to Liverpool, I recall the saying that we have in Hackney: Wiv a ladder and some glasses

You could see the 'ackney Marshes,

If it wasn't for the 'ouses in between". All the Secretary of State needed in Marsham Street was a pair of binoculars, and he could have seen the whole of the problems of the inner cities. He could have seen them from his office, without all the facade and pretence of going to look at the problems in Liverpool or Toxteth. He could have done it at any time.

The problem has been with us for a long time, but it is in London where the right hon. Gentleman has never bothered to take an interest. He knows about London because we have argued and discussed it in the House many times and he and his Ministers have replied to debates. They know about the problems, and that is confirmed by Hansard, but how did the Secretary of State approach the matter? First, he withdrew £400 million from London, which was his contribution to helping the inner city problem. In Liverpool he says that his cheque book is closed. If it is closed, why did he take money away? He has had his cheque book open and he has been throwing money away to the shires.

There is no credibility in the Secretary of State going to Liverpool, because everyone knows what he will say when he returns—that the journey was unnecessary. If he stays for two, three or four weeks the story will be the same. I could write the headlines when he returns. He will be crying about the problems, but at the end of the day he will not give any help, except by taking money away from London again.

We are already hearing stories to the effect that the Secretary of State will impose further penalties on the London boroughs. He is at present in the courts because in the eyes of the eight London boroughs he has acted unreasonably. If by some chance he should escape on a technicality and he has not, in the eyes of the judge, acted unreasonably, I guess that he will redistribute that money to Liverpool. Therefore he will impose penalties on Hackney, for example, and the GLC. He cannot take much more from the ILEA, because he does not give it any money now. Once more London will suffer by not having sufficient money to carry out its work.

The Treasury has an obligation to tell us how it believes that it is possible to control the problems in the inner London boroughs and how it believes we can recover from the disasters that we face. I do not believe that we can recover in a year, or even two years.

What is the strategy? What does the Prime Minister mean when she says that next year we shall get inflation down? Down to what? It was only 8 per cent. when the Government took office. Are they saying that it will go down below 8 per cent.?

Photo of Mr Ronald Brown Mr Ronald Brown , Hackney South and Shoreditch

It may have been 8·5 per cent., but that was all it was. When it was increased to 20 per cent. by the Government—

Photo of Mr Ronald Brown Mr Ronald Brown , Hackney South and Shoreditch

Indeed, it was more; that is true. But now it is a great virtue. The Government are starting to bring inflation down, as if they had done something great. It is put up and brought down, and that is a virtue. Even if it were to come down to the point where the Government began to push it up, what would we gain? How can it be argued that we have inflation under control? It was under control before.

As the Minister knows, his Department brought out what I call the new Tory fiddle factor. The RPI was showing the wrong answers to the questions being asked. It was showing that the Government were pushing the rate of inflation up too high, so they produced a new figure, the TPI, to pretend that matters were not as bad as they really were. We had to take taxation into account. Where is that figure now? What is happening? There is still a large gap and the TPI shows a different picture from that shown by the RPI. One has a clear intimation of the way that the Treasury operates. It pretends that what is fact is not fact but that it is all mythology. Therefore, when we talk about bringing down and controlling the rate of inflation, we discuss what is, in effect, a piece of jiggery-pokery.

The Chief Secretary has an opportunity tonight to explain to the House the Treasury's strategy for developing the country, what is this inflation that Ministers talk about, and why it went up from 8 per cent. to above 20 per cent. They think that they are bringing it down to 11 or 12 per cent. They are not quite sure. It may go up again in August and then come down in September, when we shall see the light at the end of the tunnel.

Only two months have passed since every Minister had his small package. I referred to it during our last debate on London. There was evidence that every Tory hierchical man was given a package which he was to go out to sell. We had Ministers going round the country talking about the recovery that was there, and Ministers in the other place and Tory Party members up and down the country all told the same story. Suddenly it has fallen apart. We do not hear it any more. I am glad that I put it on record at the time to show exactly how this piece of party political claptrap was being organised and orchestrated to try to pretend that our circumstances were not as bad as they appeared.

That is why we have reached the stage of treating this Government with contempt. They have done nothing but cheat. They misled the people in 1979 deliberately. Those of us who tried to show the facts were accused of telling untruths, when we had put matters fairly and squarely before the people.

The Government have pretended that the present circumstances are not of their own making but have come from outside, when we know that they are of their own making. It is no good their talking about unemployment in America and in France. We were saying that in 1978, and in the Hansard volumes of those days we can read the reactions of the then Tory Opposition. They screamed that it was no good blaming everyone else, including the weather and God, and that it was all the fault of the Labour Government and their inadequate policies. I did not accept that then, but I am prepared to accept it now, because all our ills are of the Tory Government's making.

The Tories gained power by deliberately cheating the people; and the country will never forgive them for their behaviour. I do not know how much the Government think that they have profited by it, but we have to hang on to our belief that unless we can get the country back into economic shape, there is no future at all for our people.

I hope that this debate will at least highlight to the country exactly where the responsibility lies and on whom the responsibility can be pinned for the Treasury's insistence on pursuing its monetarist policy. It is the economics of the madhouse, and our country is being destroyed in the process.

Somehow, the Government have to be stopped. Either they can be stopped in this House in a democratic way or, if we are not careful, they will find themselves being stopped in another way, and we shall then have another discussion about how it all came about.

The responsibility is clearly and squarely on the Government's shoulders, and in that Government it must be the Treasury that takes the maximum responsibility for pursuing this total absurdity of a policy. It must be clear to the Chief Secretary that the nonsense that he and his right hon. Friends are pursuing gives them no mandate in the country. I do not believe that they have the right to run the country into the ground. There is no mandate for the Government to destroy industry, to destroy the social fabric of society, to turn people into a state of total despair and frustration, and to ensure that our young people leave school quite unable to get work and totally unable to do anything of merit. Not only those with no skills, but those with the highest skills are finding it almost impossible to get jobs. Therefore, it is a recipe for disaster.

I hope that the Government will take the view that they must now turn back from this nonsense and realise that their responsibility is not to their doctrinaire Tory politics., but to the country. They are at the helm. The country demands and deserves better treatment than it is getting. The Government must do something to provide the jobs, homes, schools and hospitals that people want. Give them a chance, and this country can become great again.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar 4:35 am, 23rd July 1981

I intervene briefly, not to bring the debate to a conclusion, but to pick up the line of argument that has been developed forcefully by a succession of Opposition Members.

I do not think that the subject of this debate is in any way out of line with the speeches that have been made. Indeed, if they were out of order, you, Mr. Deputy Speaker, would have rebuked hon. Members. The debate is entitled "The management of the economy", whereas my hon. Friends have been speaking about the mismanagement of the economy. It is not a joke. If the Chief Secretary had listened with sympathetic understanding to the speeches that have been made, he would not have found anything humorous in them.

The implications of the mismanagement of the economy in this first great recession of the post-war period are felt far more strongly in our major urban areas than anywhere else in the country. No one who drove around England in the late 1970s and early 1980s, despite the fact that the recession was growing in those years—but it has intensified enormously in the last two years—could have any doubt but that, contrasted with the recession of the 1930s, the cities have taken the brunt of the recession. The recession of 50 years ago was more widespread; it was reflected throughout the countryside as well as in our great urban areas. That is not so today. It is heavily concentrated on our cities.

We are concerned about unemployment and the location of unemployment, which is very much a problem in the inner cities. We know only too well how unemployment is affecting the whole country. It is no longer a question of the North-South division; it is a virtually countrywide phenomenon. The unemployment figure published earlier this week of 2·8 million is vivid and fresh in our minds. Looking at the figure in more detail, it is interesting, but deplorable and unusual, to note that in Greater London, which is given separately, 304,000 men and women—8 per cent. of London's working population—are now jobless. The point we need to stress is that made by my hon. Friends the Members for Tooting (Mr. Cox), Hackney, Central (Mr. Davis), Hackney, South and Shoreditch (Mr. Brown), and Vauxhall (Mr. Holland). They have spoken of the same thing—unemployment, blight, deprivation—in the inner city areas.

I have some knowledge of and acquaintanceship with this problem because when I was Secretary of State for the Environment four years ago it was clear to me that the inner cities needed a new policy and a new emphasis in Government policy. It was for that reason that we set up the special partnership arrangements. It is interesting to note that, on the best and most objective analysis of the city areas in the greatest need, seven were selected for special partnership arrangements, three of which were in London. There were schemes set up in Manchester, Liverpool, Birmingham, Newcastle and Tyneside, and in inner London there were schemes for Lambeth, Islington and Hackney boroughs and the London docklands area, including my own borough of Tower Hamlets, and Southwark and a great part of Newham as well as parts of Lewisham and Greenwich. These areas almost selected themselves because on all the indices of deprivation—and we used as many as we could—they clearly suffered a scale and intensity of deprivation and unemployment greater than elsewhere.

It was perfectly plain, looking at the unemployment figures for the areas, that they were exceptionally high. My hon. Friend the Member for Hackney, Central referred to 16 per cent. unemployment in Hackney. In Stepney and Poplar, unemployment among men today is 25 per cent.—an extraordinary and appalling figure. While these figures have, in nearly all cases, doubled during the period of this Government's misrule, they were startlingly high figures four or five years ago.

For these reasons, we deliberately attempted to direct resources to what we considered to be the areas of outstanding need. That is why we used the needs formula in determining the rate support grant and that is why substantial additional resources flowed to the areas where inner city problems were at their most serious. For the same reasons we made available greatly increased inner urban area grants for the partnership areas, introduced the Inner Urban Areas Act, and gave substantial powers to local authorities in those areas particularly to assist industry.

What has happened in the last two years is a clear indication that there has been a massive switch in the direction of local authority rate support grant. My hon. Friend the Member for Hackney, South and Shoreditch spoke of a figure of £400 million.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

That was a conservative figure.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

That is a massive figure. There is still a little uncertainty because the formulae that have been used are still under challenge. Nevertheless, large resources have been moved. It is not only from London. The other partnership areas, indeed all the major city areas, have suffered from the deliberate redirection of rate support grant to the shire counties. That is a political decision and a bad decision. The formula used was a bad formula and it is one of the most disagreeable aspects of general Government policy.

As we are debating the mangagement of the economy on the same day as we have had a statement on the conclusions of the conference of the Seven in Ottawa, it is right to make a connection and to ask one or two questions. The declaration that came out of the Ottawa summit is not likely to excite its readers, but there was a sentence in it to which the House's attention should be directed. Paragraph 4 of the Communiqué states; The fight to bring down inflation and reduce unemployment must be our highest priority and these linked problems must be tackled at the same time. I wish to make two points about that. The first is the obvious one that in the communiqu?é inflation and unemployment are placed on a par as problems of the highest priority. That is perhaps a significant development.

Earlier this week we completed the Third Reading of the Finance Bill and, in dealing with the relative importance of employment and inflation, the Chief Secretary said: We have put at the forefront the goal of reducing inflation by responsible monetary control because by doing that we are tackling the problem that has been at the heart of our trouble. I stress the point by quoting what the right hon. and learned Gentleman said later: Taken as a whole, the provisions in the Bill are designed to consolidate our progress in reducing the rate of inflation and to carry forward our anti-inflationary strategy. There is no question about what has priority in the Finance Bill, but that is clearly not the same as the statement in the Ottawa communiqué.

The second point about the communiqué is that not only are inflation and unemployment problems of equal priority, but they are linked problems that must be tackled at the same time. It is clear that, in the view of the Government and the Chief Secretary, they are not to be tackled together. It is the Government's erroneous belief that we cannot do anything about unemployment until we have dealt with the problem of inflation. The Chief Secretary and other Ministers have said that time and again. The right hon. and learned Gentleman said on Third Reading of the Finance Bill: It will, of course, take time for these policies"— the anti-inflation policies— to bear fruit in terms of higher output and productivity and lower unemployment."—[Official Report, 20 July 1981; Vol. 9, c. 80–81.] It is clear that in the Chief Secretary's mind the order of priority and timing is to deal with inflation first and unemployment second. The Ottawa communiqué says that they are of equal priority and must be dealt with at the same time. It would be interesting to know whether that represents a change of policy or whether the words of the communiqué are virtually worthless and meaningless. I look forward to the Chief Secretary's reply. That pleasure may be ours. I hope that he will have something encouraging to say.

There is one other matter that I want to put to him, because it is relevant to this debate. Those of us who are concerned about the national economy are much preoccupied with the stimulus that might be given, if economic circumstances improve, to industry and, thus, to job creation. It is the lack of jobs and the destruction of jobs that have been so devastating, nowhere more devastating than in large cities, and no more so in the large cities than in this capital city of London. Therefore, we want to know the outlook for the British economy and British industry.

I shall again link my comments with the Ottawa summit. Before the meeting took place we were told that one of the major purposes of Ottawa was for the European countries to talk to the United States Administration, meet President Reagan for the first time, have serious economic conversations with him, and to try to persuade the Americans not to pursue policies of exceptionally high interest rates. I believe that the current main lending rate in the United States is 22 per cent. That is extraordinarily high by any standards. The United States has used methods of monetary control which have relied heavily on large and short-term movements in interest rates.

The Government have tried to justify their economic strategy for this year—indeed, it is the only justification for what we consider to be a massive fiscal deflation—on the ground that, by deflating the economy through fiscal measures, there was the possibility that interest rates could be brought down. The achievement of an interest rate of 12 per cent. is something in which the Government take some pride. I must say that I thought it a somewhat modest achievement, but nevertheless that is the achievement to which they lay claim.

What is happening to interest rates in this country? The MLR remains at 12 per cent. However, the Chief Secretary knows very well that interest rates, other than the minimum lending rate, have gone up and show signs of going further. The last time that I looked at the short-term rates—the three-month rate and others—they were not 12 per cent. but 14½ per cent. In effect, interest rates, although not yet bank lending rates or the MLR, are now moving substantially above the MLR. I should like to know whether the Chief Secretary's earlier hopes of first reducing the MLR to 12 per cent. and then getting further reductions in interest rates have now been abandoned, and whether we are entering a period in which our interest rates will rise again.

If that is so, we shall have the last of the series of failures in the Government's handling of the British economy, with inflation still running at a level above that which the Government inherited, with unemployment well over double what it was two years ago, with industrial output between 18 per cent. and 20 per cent. lower than it was two years ago and with our GNP about 6½ per cent. or 7 per cent. lower than it was two years ago. If interest rates, instead of being at the same level as two years ago, are going higher, that is the final and conclusive evidence of the total failure of the Government's economic policy and of their mismanagement of the British economy.

Photo of Dr Oonagh McDonald Dr Oonagh McDonald , Thurrock 4:55 am, 23rd July 1981

The Government have provided, particularly from the mouth of the Prime Minister, two excuses for the decline in industry and for the decline in the economy. One is that the British worker is pricing himself out of a job. The other is the low level of productivity. I shall examine the two excuses in relation to the shoe industry, which is only one of a number which are suffering greatly at the hands of the Government and the way in which they are handling the economy.

Let us take first the question of the British worker pricing himself out of a job. The Prime Minister ignores the way in which other workers are obliged to work in different parts of the world. Let us compare the production of leisure shoes in Britain and in South Korea. When one compares the basic working week in South Korea and Britain one begins to understand the differences in output and the lower unit costs. The basic working day in South Korea is 10 hours. The basic working week is, therefore, much longer than it is here. Wages average £16 a week, Continuous production means that the factories work a 160-hour week. In Italy for shoes such as moccasins the, outwork is done by women and, notoriously, by children under 14 years of age.

When such factors are taken into account, it is nonsense to say that the British worker is pricing himself out of a job. I do not believe that the Prime Minister wants to put the clock back and lengthen the working day or reduce the age at which children can enter employment. Therefore, to make glib statements about the British worker is futile and does not get to the root of the problem.

Shoe imports pour into Britain. It is not simply a question of lower wages and therefore lower unit costs in terms of the wages element. There are other subsidies. Taiwan gives preferential rates of credit and lower shipping costs apply. The ex-factory price of South Korean shoes might be £3·20 whereas the ex-factory price of similar shoes would be £7 if made in Britain. That means that there is an enormous difference in the retail price. For that reason, the shoe industry has suffered greatly from imports, of cheap and high quality shoes, many of which come from Italy.

In making their excuses, the Government fail to take on board the fact that the shoe industry faces one of the most unfair trading climates faced by any major British industry. Most of Britain's competitors have introduced import controls in one form or another. For example, the chairman of the federation of shoe manufacturers recently pointed out that Italy has introduced an import deposit scheme on British imports, even though it sells 60 pairs of shoes in Britain for every one pair that we manage to sell in Italy. Three-quarters of the footwear capacity around the world is protected, while Britain, with a low tariff barrier, freely admits shoes from any part of the world.

The Government in their management—or mismanagement, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said—of the economy choose to disregard that fact entirely and fail to impose import controls to protect industries that urgently need protecting. Their decline is the cause of serious unemployment in parts of London and also in my constituency.

I hesitate to describe the shoe factory in my constituency as large. The numbers employed there have declined rapidly during the past two years from more than 1,000 to 667, with 100 more on redundancy notices. Those may come into effect in November of this year. Fifty per cent. of the work force are on short-time working of two days a week. Yet that company has recently invested £500,000 in equipment to make specialised products. It has done that entirely from its own resources because in March the Government brought to an end the special scheme to aid capital investment projects.

The Government are ignoring the cries from British shoe manufacturers for a special incentive scheme to improve the design of British shoes to enable us to compete more effectively with the Italian and Spanish shoes. The industry is in rapid decline, and 6,000 jobs were lost in 1980 alone. The Government have refused to take on board the demands for a special scheme.

The industry is suffering not only from the Government's failure in those respects, but from the overall impact of Government policy, such as raising VAT from 8 per cent. to 15 per cent. It is also suffering from the pressure of consumer spending. It sold more shoes in 1978 when a Labour Government were in power, and when consumer spending had reached a high level. Since this Government came to power, having made promises to put money in the pockets of individuals so that they could choose how to spend their resources, consumers have had less and less to spend. The impact of the sharp decline in consumer demand has been felt not only in the footwear industry but in other industries in my constituency. It has, left the industry with a sharp reduction in its work force and sales, with the expectation of more redundancies to come.

Due not to any particular effort by the Government but rather to President Reagan's efforts, the pound has declined against the dollar. That has eased certain aspects of industry. It has eased the paper industry. It has eased the difficulties of those who have to import raw materials, especially those that are priced in dollars. The main problem is that the value of the pound has not declined against European currencies. The shoe industry, like other industries, has to compete with European currencies. It is suffering from the Government's policy of pursuing a high-level pound.

The Government refuse to accept any responsibility for the level of the pound. They say that it is all due to market forces. They try to ignore the assessment of market forces when the pound begins to decline against the dollar. They refuse to do anything about the level of the pound against the European currencies and refuse, therefore, to help British industry to export to the great and wonderful market which we are supposed to have in the European Community and which, unfortunately, we are unable to exploit.

No doubt the Treasury, which is wrestling with the Department of Employment over its demands for more money, will say that the Department of Employment has already overspent on schemes which help the footwear industry as well as other industries such as textiles and furniture, which are suffering especially. It has overspent by about £200 million on the temporary short-time working compensation scheme. The Government have made the scheme far less effective. They have reduced the proportion of wages met out of the scheme from 75 per cent. to 50 per cent. That is creating special difficulties for firms such as the footwear firm in my constituency. Compensation at 75 per cent. would mean the retention of more jobs in that firm. The reduction in the payment of compensation from 12 months to nine months and delays in the processing of applications which firms make for compensation all create more and more difficulties and mean that more and more jobs disappear.

The Treasury is determined to pursue its short-sighted policy. It would rather pay out unemployment benefit and social security benefits than invest in jobs, in support schemes for industry directly, or through the existing employment measures which have been reduced in their effectiveness. It would rather fend off the demands of the Department of Employment for money and pay youngsters to lounge around the streets and get into serious outbreaks of rioting and disturbances. It would rather pursue that blinkered policy than look for effective means of preserving jobs and getting Britain through the recession from which many countries are suffering.

We plead with the Chief Secretary to listen, to open the eyes of the Treasury and to consider more effective ways of spending money in the immediate future so that jobs can be preserved and people can be kept out of civil disturbances and riots on the streets. That is what we ask the right hon. and learned Gentleman to do, and that is what we want him to tell us in reply he will do.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South 5:09 am, 23rd July 1981

The keynote of the speeches of my hon. Friends is impending disaster. One is reminded of the stalling speed of an aeroplane. I shall draw to the attention of the Chief Secretary matters as they are seen from my constituency in East London. If what I say appears slightly naive and perhaps on occasions mistaken, the right hon. and learned Gentleman must understand that I am expressing the views of many of my constituents. I hope that he will correct any factual errors when he replies and perhaps comment on some of the matters to which I refer. They knit together and enlarge upon some of the factors that my hon. Friends have mentioned.

We are talking about the Treasury and its responsibility for the efficiency of the national economy. The Vote for the Treasury in the Consolidated Fund is to ensure that it looks after the national economy properly and is accountable for it. The Chief Secretary and the Chancellor of the Exchequer have two main tasks: the economic management of the country as a whole, and the management of public money in particular. It so happens that their theories knit the two together. What they do not have responsibility for—the Treasury never has had, except in the figure of the Prime Minister as First Lord of the Treasury—is the effects of their actions on the ground. Other Ministries in Whitehall—Environment, Industry and so on—have to meet the results. If the Treasury gets the theory wrong, someone else sweeps up the bits.

The Government's theory when they swept into power, as outlined by some of my hon. Friends, was that we should reduce public expenditure and make those resources available for private industry and enterprise in the economy, and it would blossom and flourish like the rose. All we had to do was ensure that the money supply was kept in control, which meant that inflation would be kept under control as well. In brief but blunt terms, that is what the Conservatives said to the country in 1979.

As recently as February 1980, the Prime Minister said to Mr. Brian Walden on television that she would have liked to see public expenditure cut by another £2 billion a year so that the money could be invested in productive industry. That is what she was saying, even 18 months ago. I do not know where she has been as First Lord of the Treasury, to assume that any reduction in public expenditure would result in investment not only in the United Kingdom, but in productive industry. There are no grounds for saying that. The right hon. Lady must be living in cloud-cuckoo-land to make such statements. She believes that the smaller the size of the public sector in the economy and the larger the market economy, the better. However, that is taken one stage further by the Prime Minister and her Government. The market economy is not just to be let loose in Britain, but is to be seen on a world-wide basis. We are to play our part in that and we must produce, become more efficient and pay our way in an international rat race.

If I have misinterpreted or in any way gone wrong, I hope that the Chief Secretary will intervene or, when he replies, will say where I have perhaps not got it right. That is how the economy is seen by the man in the street. Today, in our democracy, the man in the street is being asked to make sacrifices and he has to try to understand these matters. I believe that he understands them more than the Government realize.

At once in my area we are confronted with enormous and strange anomalies. The Beckton area of my constituency was about to be converted into virtually a pocket-sized town. There was to be private housing and public housing in a mix agreed even by the Tory GLC at one time. Now all that is in the melting pot, and land which was to be used for public building will be given to the new docklands corporation by an Order in Council coming before the House next Thursday. Instead of having a certain number of public sector houses, we are told that we shall have some in the private, or perhaps housing association, sector. We have been told that priority may well be given to people in my constituency and Newham who wish to live in them, to purchase or to rent from the housing association.

I and my constituents believe that it may well be virtually the same sort of house. But money for the housing association will come from public funds. Even if it came from private funds, it would still be money, and the bricks would be the same bricks, and unemployed people in the area ought to be building those houses irrespective of who will own them.

The Government are all against the public sector and all in favour of the private sector. Assuming the private sector housing is built, what is the difference in terms of the strain on the economy? Indeed, the money might well come out of the same pockets, because it could well come from pension funds which we are told are now bulging at the seams. But that money comes from wage earners—the same pocket from which taxes are collected. Why, therefore, do the Government make the great distinction between these two sectors, particularly in the case of Beckton?

The anomaly between what is done by the private sector and the public sector, although important in terms of our own development, appears to many of my constituents to be arbitrary and unrealistic in economic terms. They do not know why they should say that one is good and the other bad. I hope that the right hon. and learned Gentleman—because this is the Treasury's theory—will state the difference between the two sectors in terms of the country's economic resources. We know the difference in terms of political philosophy. I am asking about the difference in terms of pure economics.

My hon. Friends have pointed out that manufacturing industry throughout the country has been decimated. It has, certainly been decimated in London over the last few years, and the decline has rapidly set in. I shall not delay the House by going through the number of organisations and firms that have closed in my constituency, but no one yet knows how many young people leaving school this summer will get jobs. It is on the cards that in my constituency or elsewhere—probably both—youth unemployment in September or October will be up to by 30, 40 or 50 per cent. of school leavers, largely because much of existing industry has disappeared and that which is left cannot take people on because it is struggling along. The right hon. and learned Gentleman knows that just as well as I do. No doubt the same thing has been happening in the Chief Secretary's constituency, particularly on Teesside and Tyneside. It is the estuaries of Clydeside, Merseyside, Tyneside, Teesside and Thamesside—the Victorian areas of industrial enterprise—that are feeling it worst at present.

My constituents are saying "We are not prospering as an industrial nation because we are importing so many cheap industrial products". They feel that the Government's attitude to laissez-faire economics is responsible and that their philosophy is to encourage such imports as part of the market economy.

The assumption behind all this—I have had extensive correspondence about it with Ministers at the Department of Industry—is that it is quite all right because the fact that each country has its own advantages which it develops means that the resulting trade makes everyone better off. Ministers do not accept that some countries may have permanent advantages over others and that one cannot just do as the Prime Minister says and compete oneself into efficiency, for the very reason that my hon. Friend the Member for Thurrock (Dr. McDonald) pointed out. There are countries—not Third world countries or LDCs, which are the concern of the Brandt report which is to be debated here in a few hours' time, but the newly industrialised countries—where the social, political and financial regimes meet in such a way that, combined with new industrial techniques, they will always undermine the older industries, at least on a free world market basis of competition.

The idea that Britain should concentrate on those industries "at which it is most efficient" and export those may not, therefore, turn out to be correct because there may not be enough of those industries to do it. When it is pointed out that it cannot be done, the Prime Minister says that we must become efficient and compete. Some of her hon. Friends who are pressing on the question of wage levels argue that we should compete by reduction of wages, but no realistic reduction of wages, which are already low, would bring down costs in this country in such a way that it would be possible to compete. It just cannot be done.

The Chief Secretary, although he is a lawyer, surely knows enough about economics and enough about this country to know that that cannot be done. Indeed, there is a great plot to try to keep from the country the fact that in many cases our wage levels are already low. I intervened in a recent speech by the Secretary of State for Employment when he claimed that increases in unit labour costs in this country had been very high. But unit labour costs include the productivity factor, which means that one is not just dealing with the cost of labour.

To a large extent, we know why productivity in this country is low. It is because there has not been the investment in industry that there ought to have been. The Minister will say—and I perhaps have to agree—that that is because in the free market economy there are insufficient profits for the money to be available. If there are insufficient profits in manufacturing industry, where has the money been going? It has been going into land speculation, which produces very little. It merely bids up the cost of land, which must have an effect upon inflation. Indeed, I believe that it is possibly one of the major ingredients in inflation, but very little attention has been paid to it. It is simply a cess on the future. In a sense, the ownership of land is a future tollgate into the economy, but it does not produce anything. It is simply a matter of speculation and, I believe, an inbuilt inflationary factor. If the Treasury wishes to find the sources of inflation, it should look at land prices which over the past few years have consistently risen at a much higher rate than inflation. I believe that there is an inflationary mechanism there to which regular economists have not paid sufficient attention.

What is this country being reduced to economically? It is being forced back on the few industries left which may be competitive in higher or middle technology and on its basic raw materials—oil at the moment, which will run out, and then perhaps coal. The economy of this country is becoming more and more akin to that of a primary producer rather than to that of an overall balanced industrial state, and the Government are presiding over that slide.

In that process, it is the older areas which are hit first and most deeply, and it is those older areas which have the most worn-out social and industrial infrastructure. It is little wonder that they are beginning to curl up at the edges like leaves and that it is those areas that are experiencing social troubles. The situation is even worse than that. Perhaps the Chief Secretary will pay attention. He and his Government are taking more money out of those areas than out of others. As has been said, £400 million is being taken out of London and out of many of the areas that I have mentioned. It is not a laughing matter. I am glad that the Chief Secretary seems to agree about that. At some stage he must face the consequences of the Government's nonsensical economic theories.

Last night some people from my area spoke to me. They said that they did not agree with the things that were happening in the streets but that things were such that one day some people would say that the prospect of a general election was too distant. The Chief Secretary should understand the situation. If Eton and Harrow and the other 20 top public schools faced the prospect that 50 per cent. of their school leavers would not find jobs this summer, the Chief Secretary's hon. Friends would have a very different attitude.

In Britain there is social insulation. As a result, when there is a short circuit, sparks fly. That is what has been happening in Merseyside. The Chief Secretary jerks back and does not seem to understand what I am talking about. That proves the point. Social perceptions in Britain are so separated from each other as a result of our educational and social backgrounds that no one realises that something is amiss until there is a short circuit in the machinery. In the last few weeks, we have blown the fuse in Manchester and on Merseyside. It is a great pity that Conservative Members did not listen to what we said and that a fuse has had to blow before they would look at the machine.

The Secretary of State for the Environment has gone to Liverpool to see what is wrong with the fuse. He has been busy hotting up the circuit in such areas by taking money from the rate support grant. The London borough of Newham has been told that it is overspending by £8 million per annum. It has been told that it must cut the figure of £82 million to £74 million. To do that it must cut the very services on which these people most rely. Old people's home helps, library hours and so on are being cut. In cash terms, things are being cut to the bone. In the past year the borough, in an attempt to meet the Secretary of State's limits has even reduced its labour force by 7·8 per cent. by means of early retirement. By now, the Chief Secretary must know that those limits cannot be met. If they are, the social effects will be too great.

The Secretary of State for Education and Science has sent a circular to local education authorities saying, on a quite unrealistic mathematical hypothesis, that they must close schools. In my area people are rightly pointing out that the Government have taken away our docks, ship repair industry and virtually all the staple industries of the area. They point out that the Government are now trying to close their schools. In order to save small amounts on caretaking and lighting, the Secretary of State is trying to do that. At the same time, he is destroying many of the community schools that fulfil one of the last remaining wholesome community institutions in our urban areas.

The local authorities cannot be blamed because the Government are pressing them. However, confidence lessens. Conservative Members may rub their hands at the thought of having put their political opponents at a disadvantage. However, in the long run this action will rebound on the country and, in particular on them. It cannot be regarded as a successful political ploy.

I am not saying that the industrial base of the country was previously in a wholesome state. My argument is that the Government's economic theories have increased the difficulties that may have existed and have accelerated what may have been a deep and underlying trend. As the industrial base of the country shrivels, social tensions mount, especially in the areas about which I have spoken.

This has been a debate partly about London and partly about economic management. I started by saying that the effects of economic management and Treasury theories are shown by actions on the ground. I have informed the Chief Secretary of where, in my experience and the experience of my constituents, the Government's theories are leading us. I hope that the right hon. and learned Gentleman, a logical and courteous man, will say whether I have represented at any stage the theories of the Treasury and the Prime Minister. The right hon. and learned Gentleman may feel that I have exaggerated in one or two respects, but I challenge him to say whether the picture I have painted of the economy and the inner urban areas is at fault.

Photo of Mr Edward Graham Mr Edward Graham , Enfield Edmonton 5:31 am, 23rd July 1981

At 5.31 am and after three hours' debate, I do not intend to speak for too long. On a recent night, I was present in the House until a similar time. I echo the delight of my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Brown) at the fact that the Chief Secretary is in his place and that he has never left if since the debate began. We do not wish to say anything derogatory about his colleague the Under-Secretary of State for the Environment who normally graces these occasions. As the Chief Secretary will have noted, most of the speakers have been London Members. It is a pleasure also to have heard a contribution from our chief economic spokesman, my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). London Members take a special interest in the economy as it affects London. Our job is to make sure that the interests of the people of London are protected within the limited powers available to Opposition Members.

I wonder if the Chief Secretary and his colleagues, after two years in office, can feel satisfied that they occupy the exact position that they forecast in May 1979. My hon. Friends have demonstrated I believe, that after two years in office, the Government are responsible for a number of records. There is record stagnation in the house building programme throughout the country. There is not merely record unemployment but record mounting unemployment. No one can forecast where it will end. The Government refuse to say—rightly, I believe, because they simply do not know what to do to solve the problem.

The Government are also responsible for record bankruptcies. The inflation record is no better than that inherited by the Government when they came to power. I have no doubt that the Chief Secretary will point to certain factors, present in 1979, for which the Government cannot be held responsible. As we move well into the mid-term of a Government we are entitled to look for some justification of their policy and for the delivery of their election promises. But on the economic front, the Government have failed time and time again to justify the bright promise that the Conservative Party gave to the electorate.

No one would expect miracles from any incoming Government, but I suspect that many of those who voted for the Conservative Party in May 1979 expected a miracle of a kind. To be fair, they were not promised miracles; they were promised improvements on the position at 3 May 1979. Goodness only knows, my Government did not do the electorate many favours during their five years in office, but in comparison with the past two years those five years will be looked upon as the good old days, not only by my constituents but by the people of this country.

From the Government and from the Minister we are looking for some hope, but not in the terms of the Prime Minister last night to the 1922 Committee—that it may not have happened last year or this year but that next year it will happen. The Treasury colleagues of the Chief Secretary have already told us not that it will be next year but that the upturn has already started. We have seen very little evidence of it yet.

As my hon. Friend the Member for Vauxhall (Mr. Holland) pointed out, so much that affects the private sector is crucially affected by the Government' policies on public expenditure. The house building programme has been slashed by 50 per cent. in the past two years. Estimates suggest that £14 billion needs to be spent on a backlog of repairs in housing, both local authority and private. I will not insult the Chief Secretary by saying that figures of that magnitude emerged after 3 May 1979, but I want him to show that he understands the problem. I want him to give us an indication that there is some hope, because the pervading mood among my constituents, when I speak to trade unionists, to industrialists, to managers or to any group, is one of pessimism and despair.

My constituents and my constituency may be different from many others, but I doubt it. There is a mood of pessimism. The Chief Secretary may say that it is not right that people should despair, but I can speak from experience of their feelings.

I should like to say something about the consequences of the Government's economic policy, particularly in regard to the environment. Reference has already been made—not least by my hon. Friend the Member for Newham, South (Mr. Spearing)—to the disastrous effect of Treasury policies, which are also Government policies, on the environment. We are meeting at a time of considerable concern in local government about the true intentions of the Government in respect of local government.

The arguments are not about money; they are about power. The Government have decided, as a matter of policy, that they cannot afford to leave to locally elected men and women the right and the opportunity to govern their affairs in the way in which they and others for the past 100 years have sought to meet the needs of their local people.

I quote an article from my local newspaper, the Enfield Gazette, which is headlined "Latest cuts a bitter pill'. There is listed a series of events. This is not the first cut but the second cut this year and it is not the first year but the third year in which there have been two rounds of cuts which have not been wished on my constituents by the councillors, but have been forced on the council by the Government.

The article states: Top spending department, education, has been told to find cuts amounting to £257,000.Parents using the council's full-time day facilities for children will find the charges doubled from October.The opening of Clay Hill House for the mentally ill in Enfield will be delayed by three months.Many repairs to council-owned buildings will be put back. Only the most necessary will be budgeted for. We know that that means not only painting but renewal and also the non-renewal of electrical wires and such things, which can be dangerous.

The Chief Secretary should take careful note of what is happening in local government. A strong supporter of his Government—my opponent when I was leader of the Enfield council—Councillor Young, the present leader of the council, is also quoted in the Enfield Gazette: Councillor Young, like many of his Conservative colleagues, feels particularly bitter about this round of cuts because they have never been a high spending borough That can be said again. Enfield has been one of the lowest spenders and has been bottom of many league tables in pupil-teacher ratios, spending money on books and so on. Councillor Young says: We have seen boroughs spending far more than us escape this time round … Mr. Young led a delegation from Enfield to plead the borough's case with Local Government Minister Tom King". I was at that meeting and I know the type of response that he received. He said: If the council do not succeed in making the full £1·5 million of cuts they will fall foul of the Government and lose valuable grants. They would then be forced to levy a supplementary rate. That is not a Labour-controlled council but a Conservative-controlled council which is doing its level best to conform to the Government's criteria.

It is not merely councillors in the London boroughs who are concerned. Only last month, the newly-elected leader of the Association of County Councils, the leader of the Cambridgeshire county council said: I am loyal to the Conservative Government but I will fight for the right of local Government. The ACC is the tool of the county councils, nothing less, nothing more and if the county councils want us to take a certain line of action I will respond. However loyal—and most are loyal to the Conservative Government, the ACC is a body for the county councils to use. I wonder whether the Government have taken it on board that whatever their economic imperatives they have forced them so determinedly and dogmatically that in effect they have lost not only their enemies, which we are, but their friends. They take no notice of us and they have not hesitated to inflict problems, damage and misery on our constituents. I believe that they should listen to their Conservative friends and local government.

I believe, in a hackneyed phrase, that the local authorities are saying "Enough is enough." They can see by the Government's Lothian and Scottish legislation and the press releases, which are fairly well authenticated, that the Government are turning the screw more and more tightly on councillors such as Councillor Young and those in other Conservative-controlled authorities.

I hope that the Government realise that what they are doing to local government and to our people not only is not to their credit but is sowing the seeds of greater unrest in London and throughout the country. An appalling decision is having to be faced by councillors, and this at a time when we read in our newspapers about possible supplementary rates and about the agony of councillors. Some of us attend meetings of local councillors, and we see them literally in agony trying to reconcile their mandate from the electors with the blunt statement of the Government that there are limits. There are limits to money, of course, but the local authorities need some understanding by the Government of their difficulty in trying to reconcile the two imperatives of which I have spoken. What is more, the Government should know that these problems affect not only local councillors and not merely the leaders of the Labour-controlled GLC but the leaders of the Tory-controlled Enfield council and the county councils alike.

The Chief Secretary has been given the opportunity by this debate to respond fully to the arguments of hon. Members. He has been given the opportunity primarily by London Members, but no Conservative London Member has contributed to the debate. I hope that the people of London will note that, when given the opportunity to speak on behalf of London, Conservative Members decided to leave it to the Chief Secretary and one other Conservative to represent the Government side of the House in this important debate.

I hope that the Chief Secretary will respond to what I consider to have been a sober statement of the facts in London by my right hon. and hon. Friends. The position is desperate. We want not merely a response but an understanding that the Government have a strategy which is capable of being implemented successfully and carried on, and the assurance that it will not last only until a general election. When Labour regains power, as I believe we shall at the next general election, the problems facing us will, regrettably, be of 1945 proportions. I can assure the Chief Secretary that, if his Government do not take the opportunity to change their policies between now and then, a Labour Government will not hesitate to do so.

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby 5:47 am, 23rd July 1981

The hon. Member for Edmonton (Mr. Graham) said with characteristic sincerity and courtesy that he sought a measure of hope from the Treasury Bench. However, I am sure that he will agree that no useful purpose is served by not presenting a realistic picture of where we stand and what the prospects are, and that true hope derives not from a rosy-tinted account but from a realistic picture, provided that that itself leads to the possibility of improvement.

When the hon. Member talked about the bright promise of the Conservative Government's entry into office, I especially respected the fact that he made it clear that it was not the Government or those seeking to become the Government who presented any kind of extravagant promises. It was made clear at the outset that we took the view that the country's problems were deep-seated and would take a long time to put right.

The hon. Member asked whether we were satisfied with the progress that had been made in that direction. It is a fair question. One is never satisfied. I do not pretend that our economy is in the shape that I should like to see. However, perhaps the hon. Gentleman would care to say, as a loyal supporter of the Labour Government, whether when his right hon. and hon. Friends were bundled out of office in 1979 after the winter of discontent they felt satisfied with the progress that they had made in their period in office. I make that comment to put matters in perspective.

The debate has concentrated on London. Hon. Members who have taken part in the debate represent mainly London constituencies and have talked about London's problems. They did so under the guise of a debate on the Government's management of the economy. I make no complaint of the fact that they have particularly described London's problems as they see them. They are entitled to do that. London's problems are not the same as those of the rest of the country, but they represent the problems of a substantial section of the country as a whole. Therefore, it is fair to look at them in considering where we stand generally.

I know that I shall be forgiven for not dealing in detail with the problems of the Metropolis as such. But inevitably, when describing the various social problems in London, those who took part in the debate were, in effect, asking for more money to be spent. Apart from the somewhat abstruse theoretical arguments of the hon. Member for Vauxhall (Mr. Holland), which I did not for the most part find wholly persuasive—it seems to me that others did not find them wholly persuasive either—the suggestion essentially was that money was required.

I do not deny that there are causes and objects in London, as elsewhere in the country—certainly in my constituency—on which money could usefully be spent. It has never been part of my case, as a supporter and protagonist of the Government's policy, to say that there is no need to spend any money and that there is nothing worth while on which to spend money. We do not say that at all. We say that we have to ask ourselves: can we, as a nation, afford to spend the amount that hon. Members have implicitly asked us to spend?

What are the consequences of spending substantial sums—even more than we already spend? Let us not forget that Opposition Members talked about cuts. There have been cuts in certain areas, but the total level of public spending has not diminished. I am sure that Opposition Members, being fair-minded, would wish to bear that in mind at the same time.

Photo of Mr Clinton Davis Mr Clinton Davis , Hackney Central

Will the right hon. and learned Gentleman give way?

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby

I should like to make my speech. I did not seek to intervene in the debate earlier, and the hour is late for an extended debate. I listened with some patience to what has been said throughout the night. I do not think it is too much to ask the House to listen to the answer.

When considering this matter, we have to ask: what are the consequences of levels of expenditure of the kind asked for? What is the way out from the recession in which we find ourselves?

I should at this point refer to what the right hon. Member for Stepney and Poplar (Mr. Shore) said about the Ottawa communiqué. We can and do have an honest disagreement about the right policy to follow, but no useful purpose is served by any misunderstanding. I think that the right hon. Gentleman was reading more into the communiqué than it bore. I am not talking about the textual criticism. There is no useful purpose to be served in scrutinising it with that sort of magnifying glass.

The right hon. Gentleman said that the communiqué stated that the fight to bring down inflation and unemployment should have the highest priority. Because the Government adhered to that phrase, the right hon. Gentleman made two proposals. The first was that there had been a change, in so far as the Government were a signatory to that communiqué, in that inflation and unemployment were placed on a par in terms of priorities. He also suggested that they should be tackled at the same time, whereas previously that had not been the view.

The right hon. Gentleman prayed in aid one of my speeches in support of the opposite proposition and suggested that this, if it was now the Government's position, showed a dramatic and recent change. That is not the case, because, although the right hon. Gentleman quoted my speech—I was flattered that he thought it merited a "revisit"—it is not quite the way I put it. I have readily said, if not in that speech in many others, that I regard unemployment as a terrible blot on our society. Representing the constituency that I do, I see no question of my not taking that view. I have even gone further and said that if I thought that there was an effective way in which we could tackle unemployment directly I would not be reluctant to go along that path. Placing inflation and unemployment on a par is no novelty for me.

The question is: what is the way to bring about this desired object? What I said in my speech, to which the right hon. Gentleman was good enough to refer, but riot in the passage that he quoted, was that I did not think that inflation and unemployment were alternatives, so that we could choose whether to turn our fire on one or the other. Rather I regard inflation as the cause of unemployment and in giving priority to the battle against inflation, which is what the Government are doing, they are not saying that they regard unemployment as less important. They are saying, rightly or wrongly, that tackling inflation will be the best way, over a period of time, to deal with unemployment. That is a view which, I recognise, not everyone may share, but it is right to be clear about what we are saying.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

I want to get this clear. I take what the Chief Secretary says about parity of importance. In his view, one has to precede the other. The right hon. and learned Gentleman is entitled to say that he does not read the Ottawa communiqué in the same way as I do, but what was interesting was that the words of the sentence are that the problems must be tackled at the same time". The suggestion is that it is a two-pronged attack on those problems. My clear understanding of what the Chief Secretary and other Ministers, including the Prime Minister, have said is that in their view we have to deal with inflation before dealing with unemployment.

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby

I think that it is a question of semantics. [Interruption.] There is a real difference of opinion as to what should be done, but it does help to clarify the debate if we can deal with it in a serious way. I say that it is a matter of semantics because, if one adopts the view I have explained, that the right way to tackle unemployment on anything other than a short-term and ephemeral basis is to deal with the fundamental problem of the economy that is caused by inflation, we are at the same time tackling the problem of unemployment. That is the point and it is true.

It is also right—[Interruption.] I know that the right hon. Gentleman does not agree with me and I am not expecting a conversion on his part at this hour in the morning. The object of the exercise is that we should both have the the opportunity to explain our position and that is what I am now seeking to do.

Photo of Mr Clinton Davis Mr Clinton Davis , Hackney Central

Will the right hon. and learned Gentleman explain the logic of his position? The Government claim that inflation has been reducing, but unemployment has been rising inexorably. How does the Chief Secretary make sense of that?

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby

That is not a very taxing question. Inflationary pressures have existed in the economy for a long time and the consequences of squeezing them out will obviously be extremely difficult in the short term, but that does not contradict the central proposition that I was seeking to make.

On the question of alleviating unemployment, as opposed to curing it, the cure must be applied in the way that I have described, but the considerable sums that the Government have spent on special employment measures have shown our concern to alleviate the problem. Those measures must be looked at in the right way. They are essentially palliatives and will not produce permanent jobs, but they are important to those of us who have a social concern, which may not show itself in the way that Labour Members show their concern, but is none the less real for that. I am prepared to disagree with the right hon. Member for Stepney and Poplar, but I am not prepared to have my concern regarded as less sincere because it leads to different policies.

The palliative measures are important because we have to try to assist in that way while recognising that there is a trade-off. If we spend money on such measures we are pre-empting resources, creating pressure on interest rates and making it more difficult for money to be spent on long-term measures. However, in present circumstances it is necessary to spend money on short-term measures and we are doing so.

The Government's response to riots and their consequences has been responsible. It has been widely regarded as right that we should reassert support for the forces of law and order and give them the assistance that is necessary to enable them to deal with the problems that face them. Hon. Members have vividly described some of the social problems in our cities and they will only be worsened if the very fabric of the inner cities is allowed to be destroyed in disorder. Therefore, it is right that we should give that priority in the short run.

However, it is also right to go on to examine the cities' social problems. The right hon. Member for Stepney and Poplar may pooh-pooh that approach. He may say that one has only to look from Marsham Street and one can see the social problems, and that it is not necessary to go to Liverpool to do that.

But Labour Governments have been in power for longer than Conservative Governments in recent years and some humility is sometimes called for. A wide variety of policies have been followed in urban areas and the sort of events that we have seen in our inner cities in recent weeks do not come about overnight, or even within two years.

There has been a cumulative series of events and policies which have involved the expenditure of not inconsiderable sums. It is incredible that Labour Members can suggest that, in so far as there has been a diminution in the sums spent—and they are still considerable—that has led to the disorder. That is a facile analysis of the situation.

It is reasonable for the Government, having dealt first with law and order, to investigate whether the money is being spent in the right way, whether efforts have been properly co-ordinated and so on. That seems to me to be an entirely reasonable and civilised approach.

Finally, I come to the question of hope in the outturn, which the hon. Gentleman mentioned. All the economic indicators show that in the coming year or so we are likely to see a gradual move out of recession. I do seek to present the situation in extravagantly optimistic terms, but it is the Government's task to make sure that British industry and the British economy can take advantage of the emergency from recession when it comes.

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby

No, I shall not give way. It is vitally important—

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Will the right hon. and learned Gentleman give way?

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

The right hon. and learned Gentleman is obviously replying to my speech.

Photo of Mr Ernest Armstrong Mr Ernest Armstrong , North West Durham

Order. The Minister is obviously not giving way.

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby

The measures on the supply side that are required to make sure that we are in a position to emerge from the recession in the best possible shape to take the opportunities that arise are vitally important. The signs that productivity is up, and the signs of a new attitude and realism on the part of industry are very real and should not be underrated. At a time when the world economy is in extreme difficulty, by tackling the problems that have faced us for 20 years at their root, as I said in the speech which the right hon. Gentleman quoted, we have produced a situation in which, when we emerge from the recession, we shall do so in better shape and with a better chance of facing world competition than we have in the past.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

On a point of order, Mr, Deputy Speaker. May I apologise for what may have appeared to you to have been disorderly conduct? However, the Minister has been asked a number of questions of a serious character and he has not replied to a serious speech. I apologise for being disorderly in those circumstances.

Photo of Mr Ernest Armstrong Mr Ernest Armstrong , North West Durham

I am grateful to the hon. Gentleman.