The Prime Minister (Mrs. Margaret Thatcher)
The right hon. Member for Ebbw Vale (Mr. Foot) wanted and secured a debate on unemployment. He has reduced it to a matter of farce. He dealt with the subject as he deals with every other subject in the only way that he knows—with his typical levity. I have never heard a more disgraceful speech on unemployment. Not one single aspect of policy did he put forward.
The right hon. Gentleman raised one or two points which I shall attempt to deal with at the outset. He referred to the present inflation rate of about 11 per cent. He said that it was slightly higher than the inflation rate that we inherited. Surely he does not take credit for his own Government for bringing the inflation rate down during their period of office. Has he forgotten that his Government did so badly that they had to call in the IMF. When they called in the IMF the rate of inflation had previously gone up to 27 per cent. It was a country ungovernable because inflation got to such a high level. Only after the IMF came in, after the Government pursued the IMF policies, did the inflation rate come right down and the economy get on a much better course.
The right hon. Gentleman referred again to the tax and prices index. I am the first to say that the tax and prices [column 327]index is higher. I am the first to say that taxation is higher than we would wish because we increased expenditure, rightly, because of the recession. But at least we had the courage to honour the bills, not by printing money but by increasing taxation. That was a much better way to deal with the problem.
The right hon. Gentleman for Ebbw Vale asked me to make predictions about unemployment. I quote what he said when he was asked to do the same from this Dispatch Box in 1975. He said:
“No, I shall not make such a prediction. It would not be sensible. Indeed, I do not think that any Government have made predictions of the character suggested” .—[Official Report, 28 October 1975; Vol. 898, c. 1267.]
I follow the right hon. Gentleman. I shall not make such a prediction.
The right hon. Member for Ebbw Vale also asked when the improvement in the recession and the upturn will come. I cannot give him a precise prediction about that either. I am, naturally, dissatisfied with the current level of unemployment.
“The figure is already much too high and the danger is that it will rise higher still for several months to come. Partly the trouble arises from the recession which has hit many countries besides our own. Our capacity to overcome the menace will depend on a combination of policies, not least immediately upon our success in curbing inflation.” —[Official Report, 1 July 1975; Vol. 894, c. 1170.]
That was the right hon. Member for Ebbw Vale.
Every speaker in the debate has expressed the deepest concern, which is shared by every Member of the Government, about the tragedy, the human tragedy, of unemployment. Unemployment, especially prolonged unemployment, is an evil and high levels of unemployment are a tragic waste of human and material resources.
These things, as my right hon. Friend the Member for Chelmsford (Mr.St. John-Stevas) reminded us, are not in dispute. The argument is about the effective remedies to cure the evil. Finding that remedy is not easy. If it were, unemployment would not have doubled during the time that the right hon. Member for Ebbw Vale was in Government, nor would it have nearly trebled in his constituency.
Mr. Geoffrey Robinson (Coventry, North-West)
The Prime Minister mentioned the importance of the length of unemployment. Will she confirm that the length of unemployment, not just the numbers, has dramatically increased? Does she agree that that shows that the problem is increasing far faster than any remedy by the Government? Will she confirm that the problem has increased by about 30 per cent?
The Prime Minister
The length of time in which some people have been unemployed has indeed increased. If the hon. Gentleman wishes to put down a question asking for a statistical figure I will, of course, give it.
I was saying that the argument is not about whether unemployment is a tragedy—that is not in dispute—but how to find an effective remedy. We have heard none from the Opposition Benches. I was pointing out that, had the right hon. Gentleman been able to find an effective remedy, he would never have allowed unemployment to rise by 1 million during his own time in office, nor allowed unemployment in his own constituency to treble.
Fine speeches did not stop unemployment rising then. The good intentions of the then Government did not create more jobs. Today, Labour Members, still with the best [column 328]intentions, have advocated the self-same remedies that failed before. If they were implemented, they would fail again. They are short-lived policies which would have, at most, a transitory effect. In the short run, Governments can determine prices, incomes and increase the number of jobs, but in the long run, economic considerations always exact their toll. Then the palliatives which were designed to avoid realities leave behind their own problems, and the solution becomes more difficult than before.
All the proposals put forward by Labour Members ignore the fact that resources are limited in relation to demand and that money spent to satisfy one need means forgoing another.
Mr. Neil Kinnock (Bedwellty)
It depends on one's priorities.
The Prime Minister
Labour Members do not recognise that any budget is limited. Of course, every budget is limited, and money spent on satisfying one need means forgoing another need. If Labour Members do not understand that, they were never, never fit to be in Government. Such choices do have to be made, and to try to get round them by printing money is not only to debase the coinage but to debase the currency of politics.
The right hon. Member for Chesterfield (Mr. Varley) did not put up a single item of policy. His speech was almost totally devoid of any material about policy. He said that we bleat about where the money is to come from. Clearly, he would have printed the lot. However, if one spends money, it comes either from taxation or from borrowing. Certainly, we are spending a great deal. Indeed, if I may say so, we are spending rather too much. We are taxing very highly to finance things like the National Health Service, expenditure on which has increased by 2 per cent. What is the right hon. Gentleman's remedy for unemployment? He has none. His only so-called remedy is a remedy that has the name of reflation, which means creating inflation on top of inflation. That remedy, if such it could be called, has been tried before. If he creates inflation on top of inflation, the right hon. Gentleman knows that for a time it will create a few more jobs, until the increased inflation takes away jobs from a far larger number of people and unemployment rises again. Then what does he do? He adds another bit of inflation and another bit, until we have suitcase money of the kind that they had in Germany in the inter-war period.
Labour Members asked that the public sector borrowing requirement be increased. David Blake has given the figure of £4 billion; the TUC suggested £6 billion. David Blake says that the £4 billion would reduce unemployment by only 100,000. What it would do to inflation would take jobs away from our people far more than it would reduce unemployment. Then the whole problem would start again.
Time after time Labour Members have said “Reflate” . Other hon. Members have admitted that we cannot put inflation in jeopardy and that we cannot risk increasing inflation. They have admitted that getting inflation down is the way to tackle unemployment. They have said “No, we do not want any more inflation. Taxes are already too high.” Then comes the final trump card— “but we want a little controlled reflation now, a little bit of public sector expansion” . That is precisely the same thing—the same reflation—which has failed before.
The hon. Member for Eton and Slough (Miss Lestor) and others said that spending the money paid in [column 329]unemployment benefit on jobs would be a better way of spending it. But if we put everyone back in jobs it would cost a great deal more. The money would have to come from profitable industry and that would ultimately put far more people out of jobs.
My hon. Friend the Member for Dartford (Mr. Dunn), whose speech showed that he is more familiar with the 1930s than is the right hon. Member for Ebbw Vale, pointed out that more Government spending does not necessarily reduce unemployment. Of course, it does not. There is a good case to be argued that more Government spending reduces the resources available to the private sector where they could be used very much better.
The question is not whether there are cuts, but where the cuts fall. Reductions in expenditure either have to fall on Government policy or have to be financed by taxation, and fall on the family. More money being taken by the Government means a good deal less for the family to spend for its own purposes and frequently the family believes that it could spend it better. [Interruption.]
Mr. Speaker
Order. Throughout the day we have had a debate in which hon. Members have been allowed to speak.
Mr. Eric S. Heffer (Liverpool, Walton)
Why did you not get up when the Leader of the Opposition was being shouted down?
Mr. Speaker
Order. The hon. Member for Liverpool, Walton, (Mr. Heffer) should be quiet. Anyone who was present knows that the Leader of the Opposition was heard.
Hon. Members
No.
The Prime Minister
The argument has been put that we should have more public investment. Many of us would like to have more public investment, but two conditions have to be met. First, we must be sure that the money going into public investment brings a proper return to the community. Even Socialist economies insist on that.
We also have to find the resources. For years too much of such investment has produced hopelessly inadequate and often negative returns. If we look at steel, shipbuilding, coal or the railways we see that frequently that has produced negative returns. We have poured billions and billions of pounds into those industries. Where is the benefit to the community?
Most companies in the private sector would have used such resources better and would have produced profits for reinvestment and more jobs. Alternatively, they would have come under the discipline of bankruptcy, which does not apply to nationalised industries. That is why we are insisting, as with railway electrification, that new investment proposals are properly justified.
The second condition is that money for public investment has to come from somewhere. It is no good Labour Members telling the Government that civil servants, ambulancemen and every other public sector group that comes along should be given more, and telling us not to make manpower savings, if they want us to spend more on capital projects. It is no good their glibly saying that nationalised industries should just be allowed to borrow more. That must mean borrowing at the expense of the private sector or more printing of money. [column 330]
We must find money from existing budgets and find projects that will give the sort of return that the public are entitled to expect from the use of their money.
Both sides of the House are united in wanting to see more jobs in the British economy. Both sides of the House agree that we have a special duty to the school leavers and to the young unemployed, a special duty to encourage training and retraining and a special duty to encourage short-time working instead of redundancies. I am proud of the fact that our programme of special employment and training measures covered about 947,000 people by the end of May.
My right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) gave an interesting speech demonstrating his concern for the young and putting forward his project for community work. A number of us feel that a compulsory project would not be right. Other opportunities are available to a considerable number of young people, which might suit them better. If we were to have a compulsory project, we could not provide good facilities for all those who took part in it. We are interested in seeing as many young people as possible using their time to engage in voluntary work. We have recently increased the amount which they can earn by engaging in voluntary work without losing their unemployment benefit.
We can provide productive jobs only when people produce the goods and services which other people will buy. That means, above all, competing successfully with other countries. The policies put forward by the Labour Party and the policies of this Administration have to be measured against this simple criterion: Will they make this country more competitive?
The Leader of the Opposition asked for reflation and higher prices throughout the economy. That will not help to make us competitive. That is why we say that keeping inflation under control has to come first. The right hon. Gentleman and hon. Members on the Opposition Benches want a larger public sector and more loss-making monopolies charging higher prices. That will not make us competitive. It will put an intolerable burden on the many industries that are already profitable and struggling to stay profitable. That is why we say that we wish to demonopolise many of those industries and to make resources available to the private sector so that the private sector may flourish.
Members of the Opposition argue for import controls and protection—I shall deal with that in a moment—so that our industry is insulated from market forces. That will not make us competitive. Of course not. That is why we believe in a market economy which is so much better a bargain for the consumer and which is the sector which delivers most of the export goods overseas.
I must refer to pay. We hear precious little these days from the Leader of the Opposition about that. In his social contract days, he used to give the impression that he thought it important. Not now. Instead, he addresses the Transport and General Workers Union on nuclear disarmament while it tells him that it would not be prepared to discuss pay with a future Labour Government. However, it cannot ignore the fact that pay is a crucial factor in competitiveness and that until we pay ourselves what we have earned, we will continue to lose jobs.
May we look at the figures for one moment? As my right hon. Friend James Priorthe Secretary of State for Employment said, our competitiveness has deteriorated massively. [column 331]Partly, that was due to the strength of sterling, but it was also due to earnings rising so much faster than those of our competitors. Since 1977, our living standards have gone up by 15 per cent., while production has fallen. [Interruption.] It is serious. That is why hon. Gentlemen cannot bear listening to it. It is sound and it is serious—they are only used to farce. It is sound and serious, it makes sense and it is serious policy, which will produce the solutions in the end. I sometimes feel that Labour Members would rather have more unemployment than put into operation sound policies. They are concerned only with making political capital out of unemployment, but we are concerned with solving it. We are concerned with solving it and laying a proper base of sound jobs in the longer run—a proper base which we have not had.
The Labour Government took office with 600,000 unemployed. They left office with 1.3 million unemployed. They increased unemployment by 1 million. We have increased unemployment by 1 million, but we are pursuing—and are determined to pursue—long-term policies that will reduce unemployment and give the youngsters of Britain the chance of a future—[Interruption.] The Opposition cannot bear to listen to the facts.
I wish to say a word about profits. One of the reasons for higher unemployment is that the proportion of profits has fallen to abysmally low levels. Too much was taken out in pay, and companies were drained of profits. They did not have the resources left for investment. Without profits businesses must contract, employees are laid off, and there is no money for new investment. No new investment jeopardises future productivity and gives the advantage to our competitors overseas. That is what has happened. Against the figures that I have mentioned, it does credit to the resilience of our industries that output and employment have not fallen even further.
Attitudes are changing. More people are beginning to understand that jobs are lost if people pay themselves too much. Settlements are averaging single figures, and that without either a compulsory or voluntary pay policy. There are no distortions to unwind. There has been some improvement in industry's competitiveness. The new sense of realism must continue. Pay settlements must continue to come down, and the drive for improved productivity must continue. Only then will there be a real prospect of recovery.
A number of right hon. and hon. members mentioned incomes policy, including my right hon. Friend the Member for Chelmsford, the hon. Member for Rochdale (Mr. Smith) and the right hon. Member for Stoke-on-Trent, South (Mr. Ashley). That is one issue on which I agree with Opposition Members. Incomes policies do not work. Characteristically, I do not think the Leader of the Opposition mentioned that topic in his speech. All the experience in Britain shows that, under Governments of both parties—however well-intentioned—neither statutory nor voluntary incomes policies have any lasting impact on wages or inflation. In the end they break down under their own weight, and in the process they create more and more distortion in the economy. Incomes policies, even those devised by the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), inevitably mean a further gulf between pay and productivity. Some people receive more than productivity justifies, and others less. Some feel that they are entitled to a pay rise as of right, regardless of performance. The result is that there are fewer jobs. [column 332]
Except for their own employees, the Government cannot be responsible for determining pay in the private sector. It is for employers and employees to work out that between themselves. If they pay themselves realistically they benefit from greater job security—if not, they pay the penalty. Every time that we have tried an incomes policy it has not lasted for more than two years. The problems that have occurred during the unwinding of an incomes policy have more than cancelled out any benefits that accrued. Even the threat of an incomes policy sometimes means that the unions pre-empt with large wage increases. We cannot go that way again. It is a short-term palliative. We must take the long-term solution.
Many hon. Members suggested import controls. They are simply not possible over the generality of the economy. We could not possibly move to a siege economy unless we had only half our population. Import controls in general would shelter the inefficient, discourage modernisation and re-equipment, restrict consumer choice and result in rising prices and a falling standard of living. We have selective import controls to help particular industries through difficult times. Indeed, they have increased since 1970. Then they were effective only on certain cotton textiles. They now extend to a wide variety of textiles, shoes, coals and voluntary arrangements for cars.
Those who ask for import controls forget just how many jobs there are in Britain in exports and how much of our manufacturing output goes into exports. Millions of jobs depend on our maintaining access to and competitiveness in overseas markets. We export a greater proportion of our GDP than any of our major competitors—double the proportion of Japan and four times that of the United States. We must continue to keep up and, if possible, increase that share of world trade if we are to provide jobs for our own people in future.
The interesting thing is that those who often demand more aid for the developing countries are those who are the first to put up shutters against the goods coming in. Many of those countries wish to have more trade rather than more aid. We usually have a balance of trade with those developing countries. We have that balance through exporting to them engineering products and machinery. We cannot deny them the possibility of earning the money to pay for them by putting up the shutters on imports into this country.
Mr. Foot
As the right hon. Lady has apparently told the House and the country that in no single particular is she prepared to alter the policies that she is now pursuing, will she answer the question that she would not answer at the beginning of her speech and tell us whether in the light of those policies she thinks that the Secretary of State for Employment was right to mention the figure of 3 million unemployed? Does she accept that figure?
The Prime Minister
Unemployment will rise from where it is now. Of course it will because of the increasing number of school leavers and because there is a substantial increase in the numbers in the labour force. That is because fewer people are retiring and there are more school leavers. I regret that it will continue to rise, but the policies which we are pursuing are the policies which will get unemployment down in the longer run and which will create genuine jobs and give a sound basis for prosperity.
There are now clear signs that the worst of the recession is over. Manufacturing and industrial production in April [column 333]was at the same level as last December. Consumption has been comparatively buoyant in the first quarter and retail sales have remained at a high level. The numbers coming on to the unemployment register have fallen compared with the numbers coming on in previous months. There are a number of signs from which we can take encouragement. We have had pay settlements averaging single figures compared with settlements of over 20 per cent. last year.
In inviting the House to support the Government's motion, I make it clear that I do not question the genuine concern of Opposition Members and I do not doubt their compassion. Equally, let them not doubt ours. We are dealing with one of the most complex and sensitive problems of our time. Neither compassion nor rhetoric is enough. There is nothing inevitable about high unemployment. In the future as in the past we may be sure that there will be increasing demands for all kinds of goods and services to meet the continuing improvement in living standards. It is for us in this country to win our share of that growing trade at home and abroad by keeping our quality and costs competitive. There are good signs that British management and workers are beginning to do just that.
Hope—real hope—lies not in running from reality but in facing it. I ask the House to face that reality tonight.
Question put, That the amendment be made:—
The House divided: Ayes 249, Noes 311.