Speeches, Interviews & Other Statements

Margaret Thatcher

HC S [Her Majesty’s Government (Opposition Motion) (motion of confidence)]

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC [912/1445-72]
Editorial comments: 1612-1730. MT spoke at cc1446-57.
Importance ranking: Key
Word count: 9700
Themes: Judiciary, Parliament, Economy (general discussions), Industry, Local elections, Monetary policy, Privatized & state industries, Public spending & borrowing, Taxation, Foreign policy (Western Europe - non-EU), Labour Party & socialism, Liberal & Social Democratic Parties, Social security & welfare, Trade unions
[column 1445]


Mr. Speaker

Before I call the right hon. Lady the Leader of the Opposition to propose her motion, I should tell the House that I have had representations that I should call the Liberal amendment. I gave considerable and careful thought to this question, but I must tell the House that it is a long-standing convention that if the Government give time for the discussion of a motion of no confidence or censure put down by the official Opposition the Government themselves do not table an amendment to the motion, and any amendment tabled by any other party or group in the House is not called.

I take it that the purpose of that convention is to allow an unimpeded and clear decision to be taken for or against the motion. Although it has weighed in my mind that in the present Parliament the number of smaller opposition parties is somewhat larger than it has been in other Parliaments for many years past, that does not affect the principle which I have stated. Therefore, I am unable to accept the amendment today. I hope that the Liberal Party will find some other opportunity to seek a formal decision in its own way.

Mr. A. J. Beith (Berwick-upon Tweed)

On a point of order, Mr. Speaker. I am grateful to you for the careful thought that you have given to our request and to requests from other parties, and for the ample reasons that you have set out. But would it not be desirable for the Procedure Committee to give consideration to the fact—[Interruption.]

Mr. Speaker

Order. May I say that I deplore the growing tendency in the House, on both sides, to shout abusive terms that are really out of harmony with the dignity of the House.

Mr. Beith

I was seeking to ask you, Mr. Speaker, whether you thought in the circumstances you have described that it would be desirable for the Procedure Committee to consider, as it has considered related matters in the past at the suggestion of Mr. Speaker, whether there should not be ways in which the parties now represented in the House which do not have confidence that Her Majesty's [column 1446]Opposition would provide a viable Government could register that view. Would that not ease the difficult decision that you have had to take, given that the Opposition are unlikely to make their Supply Day available for the purpose?

Mr. Speaker

I have no doubt that the Procedure Committee will consider the position of a Parliament in which many minority parties are obviously anxious to express their points of view. I call Mrs. Thatcher.

4.12 p.m.

Mrs. Margaret Thatcher (Finchley)

I beg to move,

That this House has no confidence in Her Majesty's Government.

This is the first Conservative Opposition motion of no confidence in the Government since 1967. There have been two Socialist motions of no confidence, one in 1972 and one in 1973. I want to make it quite clear that this motion was not put down lightly. The specific occasion arose from the economic situation, but that is not the only subject of our criticism. There is plenty else to criticise in the Government's handling of the nation's affairs.

The debate is about more than a set of statistics, about more than the one figure of 4½ per cent. It is about a whole way of life of which economic policies are but a part. It is about values and standards which are beyond economics. It is about freedom under a just law. It is about parliamentary democracy and about Parliament as the only forum of the whole nation—[Hon. Members: “Hear, hear.” ] The Government will be voting for us soon. The debate is about people who are all equally important but who are all different. Indeed, one can tell a free society from one that is not free by the extent to which variety is cultivated within it.

In the past two years, under the policies of this Government, we have seen a retreat from freedom, a retreat from the rule of law, a retreat from parliamentary democracy, a retreat from a mixed and free enterprise economy and a retreat from living within the nation's means. I note also that it takes a Socialist Government to boast that the pound has now risen to $1.77. It was $1.87 a few weeks ago when Denis Healeythe Chancellor of the Exchequer announced his Budget. It takes a Socialist [column 1447]Government to boast that the annual rate of inflation is now down to 18.9 per cent. Such is the state we have arrived at under Socialism.

Under the Socialists, rapid strides have been taken towards the Iron Curtain State. We have seen increased nationalisation measures, increased powers of central Government over both large and small companies, increased levels of tax on the pay packet and on savings alike, and an increased proportion of the national income spent not by the wage-earner but by the Government or Government agencies.

In the result, James Callaghanthe Prime Minister has become the first Socialist Minister since Hugh Gaitskellthe Chancellor of the Exchequer in 1951 to say that his policies will mean a reduced standard of living for our people. As an accurate prediction I do not quarrel with that. But it is clear that Socialist systems are not good at creating wealth; they can only spend the wealth that others create.

The first charge we make against the Government is their mismanagement of the economy. The common characteristic of Socialist Governments is that their expenditure rapidly exceeds the taxpayers' capacity and will to pay. That does not quench the Government's appetite for spending. When the Chancellor runs through the pound in the pocket he goes to the moneylenders. We have a Chancellor who has elevated bluster into a principle of economic policy and borrowing into a way of life.

The Chancellor's Budget continued the course of overspending which he has followed ever since he came to office. He continued his series of spiteful gestures against those very managers he claimed that he wanted to help. However, he included one innovation, for he surrendered the power to decide fiscal policy and the power to determine the course of the economy to an outside body. He left it to the TUC to decide the level of taxes for this year; and in some measure he left it to the TUC to determine the value of the pound. Not surprisingly, the nine weeks since Budget day have been weeks of near disaster, with the reserves depleted and the pound sinking week by week to new lows. [column 1448]

We warned the Chancellor when he introduced his Budget that it was a recipe for disaster, and the whole nation has watched that disaster unfold day by day. Finally, the extent of the potential catastrophe penetrated even his complacency and he took action. It was not thoughtful action, it was reflex action, the action of every Labour Government since the war faced with the consequences of their own policies. The Chancellor fixed up an enormous loan. Once again, a Socialist Government have bought time, or rather have borrowed time, to enable them to postpone the hard decisions, time to enable them to carry on for another six months with policies which have failed. They have borrowed time to get us deeper and deeper into debt.

The Chancellor chooses to claim that the loan that he has been able to fix up is a sign of the confidence that the rest of the world has in his policies. It is not a sign of confidence, it is a sign of patience. The world have given us a little more time. But unless the Government are removed from office we are doomed to see this money going down the drain as so much has before. The Chancellor made the borrowings, not to give us time to make fundamental changes, but to get time to avoid fundamental changes.

The Government dare not tell the truth to their own followers, let alone to the country. At all costs nothing must be done before the special TUC Congress next week.

Already some trade union leaders are getting restive. Indeed only this week I see from The Times, Alan Fisher warned that

“if the Government announce fresh public expenditure cuts after the June 16 special Congress, unions would no longer honour the new wage bargaining rules, due to take effect on August 1.”

Therefore, the Chancellor dare not act before next week. But then he dare not act before the autumn either, because there is a Labour Party conference coming up. So we have the miracle cure—more borrowing while the overspending and the nationalisation goes on. Drift, debt and decay are the whole course of this Government. [Hon. Members: “Shocking.” ] Yes, that depicts a shocking performance by the Government. [column 1449]

All the time that the Government are staggering in the short term from financial crisis to financial crisis they are damaging the long-term economic prospects of this country. They are putting far too much into the public sector and starving the private sector.

Yesterday, while the Prime Minister at Bournemouth was saying that the private sector had to put its scoop into the same pool as the public sector, the Chancellor was busy announcing a new loan—a loan at a 14 per cent. annual rate of interest. Other nations which handle their affairs competently and prudently can bring their interest rates down, thereby helping their manufacturers to invest. We cannot. We are borrowing so much at such high rates that debt interest is becoming a major problem. It now amounts to 10 per cent. of Government expenditure. It absorbs the whole yield of VAT and corporation tax to finance the debt interest alone. Put another way, half the public sector borrowing requirement goes not to repaying debt but to paying interest on past debt.

The other day the Prime Minister spoke to the CBI about investment and the Price Code. The Price Code is now so complex that one of our major companies recently said that it cost it £500,000 a year to operate it. If industry now has to pay 14 per cent. interest, its profit margins will not be big enough to service the loans.

Will the Prime Minister's promise to improve the profit margins sufficiently to encourage investment be yet another broken pledge? Will the promise to allow prices to increase sufficiently to give a good return on investment be another broken pledge? One thing is certain, as the CBI pointed out to the Prime Minister and the Chancellor: either we have a price code which allows enough profitability or we do not get jobs tomorrow. The choice is as clear as that.

Of course, both the Chancellor and the Prime Minister always pay lip service to profitability, but, when the time comes they fail to take the requisite action. However, they know that it is the key to future prosperity.

Two of the most prosperous countries in the world with two of the strongest free enterprise systems are countries where the rôle of profit in building pros[column 1450]perity is encouraged and acknowledged. They are usually two of the countries from which this Government have to borrow money when they need it.

Both the Prime Minister and the Chancellor also pay lip service to the need to encourage small businesses. They know that they will get new jobs from the small businesses of today. They know that they get more jobs from the expansion of small businesses. Yet, although they pay lip service to them, they do not hesitate to put enormous new taxes upon them which penalise and discourage them from expanding. Such taxes encourage a one-generation society and prevent people from passing on the fruits of their labours to their families. If we cut off the continuity of society from the efforts of the past and cut off the continuity to the future we shall get a selfish society. [Interruption.] Of course we shall, because we shall have no incentive to build for future generations.

The Prime Minister and the Chancellor also pay lip service to taxation incentives. They pay lip service to the need for middle management to have more rewards. They pay lip service to their grievances. But what do they do about it? Nothing. These people are the discarded section of society under a Labour Government.

The Government know that people need incentives and rewards. They know, for example, that the middle management person on about £5,000 a year will, after tax, take home about £500 a year more in France than he will in Britain. The Government know full well that the queues of these people to go abroad are increasing; yet they do nothing to help. They do nothing, except pay lip service to their grievances.

It is not only those people who have suffered from the high taxation of a Labour Government. We have the highest rate of taxation on the lowest incomes in the whole of the EEC. We also have the highest rate of taxation on the highest incomes in the whole of the EEC. In fact, we have the highest rate of direct taxation in Europe. It is little wonder that many European countries are forging ahead much faster than we are, because they offer incentives. People in those countries keep more of their pay packets than is kept by our people here. [column 1451]

The Government pay lip service to the mixed economy, but they put up enormous threats of future nationalisation. The Shipbuilding and Aircraft Industries Bill is a total irrelevance to the needs of our modern society. Nothing could be less justified than the pretence that the Government need this measure to save jobs in the shipbuilding and aircraft industries. The Government have all the power that they need. But they are nationalising out of dogma. They pay lip service to the mixed society, but in practice they reduce the mixed society as fast and as far as they can so that in fact we become the fixed society and the complete Socialist state.

Added to that, vast new sections of industry are threatened under Labour's new draft programme for Britain, which has been called a plan for national ruin. Pharmaceuticals, banks, insurance and land are under the threat of nationalisation. As I said earlier, that is a recipe for the complete Iron Curtain State.

We note that the Prime Minister has not disowned, but has only postponed, the programme. The Prime Minister has postponed the extra public expenditure for which the plan called, but yesterday Michael Footthe Leader of the House seemed to want more public expenditure. For him it is the red badge of Socialist courage. For the country it is the red badge of bankruptcy.

Mismanagement of the economy leads not only to economic problems but to falling standards in the social services. Socialists pretend that they are the protectors of the social services, but, by damaging the economy, they are damaging our capacity to help those in need.

Our social services are poorer than in many other countries in Europe, because they have concentrated on increasing prosperity and creating wealth. They have better pension schemes and better unemployment benefit. They spend more on health. They know that every welfare payment, every improved pension help to the elderly, every improved aid to the disabled, every child benefit depends in the last resort on the wealth-creating capacity of industry and the earnings of those who work in it. Therefore, it is not surprising that, with this Government's attitude towards the productive sector of the economy, pensions [column 1452]and child benefit proposals have been adversely affected. Because they had not laid the foundations for increased prosperity this Government have done a deal with pensions, which effectively eliminated increases for six months when price increases were at their peak. They shelved the child benefit scheme. We would have thought that they would at least introduce a scheme under which the same amount as they spend now could be handed to the mother and not to the father. But they did not do so. Apparently fear of the unions paralysed their capacity to act.

If the devaluation of our currency is not enough in itself to justify the motion of no confidence—and I believe that it is—there is a second charge against the Government. They have devalued liberties as well. These days, having a job depends not only on joining a trade union but on joining a particular trade union. Labour would rather throw a person out of a job than let him continue in his job without joining the union.

Mr. William Molloy (Ealing, North)

The Conservatives threw men into gaol.

Mrs. Thatcher

The hon. Gentleman never did understand the rule of law, so his intervention is not surprising.

Mr. Molloy

Does the right hon. Lady deny that she was a member of a Government who put working men in gaol? Then they found themselves in a dilemma and had to be rescued by the Official Solicitor, who got the men out of gaol.

Mrs. Thatcher

The hon. Gentleman does not understand contempt of court. It is operated wholly independently of Parliament. What the hon. Member is proposing is that Parliament should interfere with the impartial administration of the law.

This is how Lord Salmon put the case when he spoke on the Trade Union and Labour Relations (Amendment) Bill and the relevant section of it in March last year:

“If Section 5 is struck out of the Act, this would strike at the very root of a principle which all my life I have done my best to defend—the principle that the law of England always protects individual liberty and the basic right of every man not to be unreasonably or arbitrarily prevented from earning his living. It protects every man against any threats or [column 1453]abuse of power from whatever quarter those threats may come. For a man to be expelled by his trade union is infinitely more damaging to him than if he is unfairly dismissed by his employers. After all, there are other employers, but if he is expelled by his trade union, he is prevented from earning his living by the skills which he has worked to acquire.'—[Official Report, House of Lords, 10th March 1975; Vol. 358, c. 25.]

Nevertheless, this Government struck that section out of the Act, so that we now have coercion and in order to keep a job a person must join a trade union. Many people thought it could never happen here but it did happen here as part of the price of the social contract, or should I say the anti-social contract?

The other way in which the Government have devalued the rule of law is the way in which they bowed—moderates along with those below the Gangway—to the Clay Cross comrades—[Interruption.] It is interesting to note that on this occasion when an election took place the people knew exactly what to do with the Labour candidates who represented that area. The six official Labour candidates at Clay Cross, scene of the events involving those councillors who were in defiance of the Housing Finance Act, were defeated by Ratepayers' candidates for seats on the North-East Derbyshire District Council. It was the first time in 25 years of the Labour Party in Clay Cross that they were not represented on the council. That is what the people thought about the whole episode. What a pity that the Government could not live up to the people's standards. What a pity that the Government, including the moderates, chose to surrender to their own left wing—the Prime Minister, the Chancellor of the Exchequer and all. One of the few people who did not vote, I believe, was Roy Jenkinsthe Home Secretary.

Mr. Dennis Skinner (Bolsover)

Is the right hon. Lady aware that when these Ratepayers' candidates took office at Clay Cross the following week, at the first council meeting they barred the whole of the Press and the public and broke three election pledges at a stroke?

Mrs. Thatcher

What I am aware of is that the electorate totally rejected the Labour Party. [Hon. Members: “Answer.” ] The third charge we level against the Government is the way in which they have devalued our parlia[column 1454]mentary institutions. We all know the difficulties we had in getting the right numbers of our own people on Committees upstairs. We all know the episode the other night of the tied vote and the vote which was won by one. We all know the willingness of the present Government to abandon the rules of the House when it suits them. I know of no principle of parliamentary democracy which enables a Government to follow the rules when the result suits them but to change the rules at short notice when the result does not suit them.

Mr. Bruce Douglas-Mann (Mitcham and Morden)

When the right hon. Lady refers to the incident of the tied vote and the one vote victory she does so in a manner which suggests that she is still under the impression that there was something improper in it. As she is aware, I raised this matter on the following day because I was unhappy about it and I made it clear to my Whips that unless I was satisfied on this point I would not wish to support the Government on the remaining stages of the Aircraft and Ship-building Bill. I have now discussed this matter at length with the Government Chief Whip and I can assure the right hon. Lady that I am completely satisfied. [Hon. Members: “Give him a job.” ] If hon. Members opposite make assertions about giving me a job they have not followed my actions in this House very closely. I have discussed this matter very carefully and I would suggest that the right hon. Lady discusses it with her Chief Whip. I am sure that she will be satisfied and that she will then make it clear to the House.

Mrs. Thatcher

I only wish I could reciprocate what the hon. Member has said, but I cannot. All along I have stuck strictly to the facts. In statements put out in the Press we have stuck to the facts. I am not satisfied on this matter. I wish I could be.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

Does my right hon. Friend appreciate that while I was abroad I was paired with a Labour Whip who voted?

Mrs. Thatcher

I was aware of that fact.

Immediately following the Chancellor's Budget I made quite clear what view I took on his innovation about referring [column 1455]certain matters to the TUC. I am sure that the stand I took then was correct, and I endorse it now. I yield to no one on the right of this House to represent all the people. It is the only forum which does represent all the people, and that duty is not discharged by rubber-stamping proposals from the TUC, or any other body. Consultation is quite a different thing from largely handing over authority. It is quite wrong for agreements to be made outside this House and then presented to it as a fait accompli. It is wrong to introduce legislation into this House simply because it is part of an agreement between the Government and the TUC. If the Trades Union Congress, having agreed to legislation, says that it is incumbent upon us to adopt it, I suggest that when a Labour Member writes his next election address it should be in these terms:

“I promise that at any time when any matter comes before the House I shall act in such matter as the Trades Union Congress instructs me.”

The Member from whom I am quoting went on to say,

“That would simplify his election address.”

He continued,

“I do not represent the Federation of British Industries, nor do I represent the Trades Union Congress. I happen to represent the constituents of Ebbw Vale. When I go back to my constituents I expect them to hold me to account for what I have done, and I do not expect if they disagree with anything I have done to be able to explain it away by saying that I did it on the instructions of some outside body. I do not want to adopt that alibi. I think it is a dishonourable one, and dangerously subversive of Parliamentary institutions.” —[Official Report, 21st October 1943; Vol. 392, c. 1593–4.]

That was said by the former Member for Ebbw Vale, Mr. Aneurin Bevan.

Mr. Norman Tebbit (Chingford)

Not that rat.

Mr. Robert Hughes (Aberdeen, North)

On a point of order, Mr. Deputy Speaker. I distinctly heard the hon. Member for Chingford (Mr. Tebbit) say “Not that rat” . Is that in order?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I have heard nothing which is out of order.

Mr. Martin Flannery (Sheffield, Hillsborough)

Further to that point of order, [column 1456]Mr. Deputy Speaker. Every one of us over here heard the hon. Member for Chingford (Mr. Tebbit) use the word “rat” about my right hon. Friend the Leader of the House.

Mr. Deputy Speaker

If the hon. Member for Chingford (Mr. Tebbit) did say the word which is alleged, I think he should withdraw it.

Mr. Tebbit

If it makes it easier for the House, Mr. Deputy Speaker, I will say that the expression I used was “Not that rat” . I specified no particular person. If it will make it easier I will use the words “One of those who are lower than vermin” , to employ a phrase once used by the former Member for Ebbw Vale.

Mrs. Thatcher

The last words in my quotation represented perfectly the situation which we feel, and we regret that that view has been abandoned by the Government and the Labour Party. It seems as though under modern day Socialism we have the trappings of parliamentary democracy, but that we are in danger of losing the substance of it. Michael FootThe Leader of the House would not even allow us to debate the proposed agreement with the TUC, let alone to influence it. The Government are trying to sidestep and debase democracy. I have asked almost every week for a debate and a White Paper. Every week the answer has been “No” .

There are many other points that my right hon. and hon. Friends will wish to take up. They will wish to consider questions of defence and security, the pursuit of foreign affaris in areas where we should take an initiative such as Cyprus and Rhodesia, the Government's failure to pursue the interests of our fishermen in the EEC. In all of these, Government actions scarcely give rise to confidence.

If the Liberals wish to abstain rather than risk a General Election in which they might do badly, any claim they have to be a party of principle is destroyed for ever more. A heavy responsibility rests on anyone who chooses to help this disastrous Administration to stagger on for a few more miserable months. If the Liberals wish to endorse more nationalisation, the Dock Work Regulation Bill the attack on parliamentary democracy, the closed shop, high taxation, perpetual borrowing, higher unemployment than [column 1457]ever before, record inflation and falling living standards, so be it. At least the nation will know where they stand and that when under fire they flee. The nation will also know that the Conservative Party will not flinch or falter and nor does it fear to face the electorate.

People are tired of seeing Britain slipping year by year further behind under Socialism. They know the full extent of our latent talents and abilities and would prefer to use them to forge ahead so that we may hold up our heads with pride instead of just holding out our hands for cash. I believe that the Government are far less ready to face reality than are the people of Britain. I believe that the people have the will and the courage to do anything required of them so long as they believe that it will lead to the rebirth of Britain.

The Prime Minister can hardly be happy with things as they are—devalued currency, devalued standards and a Parliament that his Government disregard when they can and would devalue if they could. In 1967 after his own economic strategy had collapsed the Prime Minister did a very honourable thing and resigned as Chancellor of the Exchequer. He rightly took on himself the responsibility for three years of wrong economic policies, overspending and the decline in the value of the pound. He has not been Prime Minister long, but he has been in the Cabinet since the Government came to office. Now it is he who is presiding over the mismanagement of the economy, the decline in standards and the attack on liberties. Nothing would be more honourable than for him to remember what he did in 1967 and proffer this time not just his own resignation but that of his entire Government. It is time to end this policy of “steady as she sinks.”

4.48 p.m.

The Prime Minister (Mr. James Callaghan)

I heard the right hon. Lady the Member for Finchley (Mrs. Thatcher) say that the motion of no confidence was not lightly put down. I did not hear her move it, and I do not know whether that was a Freudian slip. [Hon. Members: “She did move it.” ] Very well, she did. At any rate, having heard her interesting speech, I can quite understand why the motion was not lightly put down. [column 1458]

Whatever the right hon. Lady's motives in insisting on this vote of no confidence, with the support of a unanimous Shadow Cabinet—[Interruption]—I shall perhaps return to her motives a little later—the debate gives the Government an opportunity to restate their objectives and their strategy and political intentions. [Interruption.] If Opposition Members will do me the courtesy of listening to what I have to say instead of interrupting every half-sentence, I shall do my best to answer the right hon. Lady. I have said on many occasions, and I apply it to both sides of the House, that sedentary interruptions do nothing but lower the tone of the House. I say that to everybody.

The Government's economic objective is to overcome inflation. Already, thanks to the economic and financial policies of the Government, bolstered as they have been by the pay agreement made by the TUC, inflation has been reduced. The right hon. Lady complained that it was far too high at 18.9 per cent. I agree with her that it is far too high, but this is a rate which will continue to decline further throughout the rest of the year and our intention and belief is that by the end of 1977, if we continue with the pay policy which the TUC is proposing to its conference next week and if the Government continue with their existing policy on fiscal and monetary control, we shall be able to reduce the rate of inflation to a figure which will be comparable with that of our major competitors—France, Germany, the United States and Japan. That is the Government's first and overriding objective, and I believe that it will secure the support of the whole House.

Our second objective is to make inroads into the unacceptably high level of unemployment, which has been partially caused by inflation as well as by the world recession, and to reduce it by 1979 to 3 per cent. Our third objective, an overall objective which was agreed between the CBI, the TUC and the Government last autumn at Chequers, is to achieve a high-output, high-productivity, high-wage economy based on full employment.

Our next objective is to foster export-led expansion—an expansion which has already begun—and to ensure that this expansion, together with the domestic [column 1459]expansion which is now on the point of beginning, will have room to go on without being hampered by excessive—I repeat the word “excessive” —public expenditure demands next year. Nor must industrial expansion be fuelled by a return of inflation. We therefore have the objective of increasing industrial efficiency and enabling the wealth-producing manufacturing industry to earn sufficient surplus so that it may invest in the necessary new plant and machinery.

Another important objective, and here I part from the right hon. Lady, is to use public expenditure as a means of increasing real personal freedoms. [Hon. Members: “Gobbledegook.” ] It is not gobbledegook. The areas I was referring to are areas such as the provision of housing, the provision of educational opportunities, the provision of hospital treatment and proper health facilities and the provision of pensions in order to provide security in old age.

When hon. Members say “Gobbledegook” they tempt me to rehearse my own personal position, which I shall do. I was brought up in a family where, after my father died, we lived in two furnished rooms. That was a denial of freedom. I was unable to go to university because my parents could not pay for it. That was a denial of freedom. There was an occasion when I should have had hospital treatment and could not because we could not afford it. That was a denial of freedom. I was not alone in my generation. I am one of the older Members of the House: the new generation, thank God, has those freedoms. That is what public expenditure is about.

Among our objectives will be the underpinning of the necessary industrial regeneration of British industry. We shall seek co-operation on planning agreements. We shall support the industrial regions and we shall use the National Enterprise Board to assist in this purpose. The right hon. Lady was quite right to mention that, in addition to the economic aspects on which she criticised us, a vote of no confidence in the Government should cover much wider fields. First let me say that among our objectives—I do not necessarily put these in order of importance, although the one I am about to enumerate is very important—is the preserving of [column 1460]the integrity of the United Kingdom whilst ensuring that Scotland and Wales enjoy the devolution for which they ask.

I notice that the Scottish nationalists complain that we have not yet introduced the Bill. Even if we had done so I do not think they would not be voting with us tonight, because there is no prospect of satisfying them. Their ultimate objective is separation, is it not? No Bill which we could introduce would satisfy the Scottish nationalists. For the majority of the people in Scotland, however—and I emphasise the word “majority” —let me assure them that we shall be proceeding with a Bill in the autumn to achieve devolution in the next Session of Parliament. The Scottish nationalists now intend to vote with a Conservative Opposition who say that they intend to vote against any devolution Bill that we introduce. That is a very strange alliance between the do-nothing Tories and the all-or-nothing Scottish nationalists in order to bring down a Labour Government.

Mrs. Winifred Ewing

(Moray and Nairn)rose——

The Prime Minister

I think I have put the position perfectly fairly. I have a lot to say, and the hon. Lady will be able to make her speech later.

Mrs. Winifred Ewing


Mr. Deputy Speaker

Order. Unless the Prime Minister gives way, the hon. Lady must resume her seat.

The Prime Minister

Thank you, Mr. Deputy Speaker. I have a long speech to make.

Next, we have the overriding objective to persist in the hard and stony path of pacifying Northern Ireland, to assure the people of Northern Ireland that there is no doubt about their position as part of the United Kingdom as long as they wish to remain so but that we shall be ready to envisage a devolved Government in Northern Ireland who have the support of the whole community.

These are our objectives. We shall pursue the objective of ensuring, as far [column 1461]as Parliament can, a society in which racial harmony and tolerance will flourish, and through the medium of the Race Relations Bill, now on its way through Parliament, we shall give legislative backing to that end.

Finally, when we have recovered our economic strength we shall use the influence that we gain from our economic recovery to strengthen our position abroad, to ensure a peaceful solution to world problems through the use of the United Nations and other international organisations, to assist in overcoming the poverty of the Third World and to use our influence in the defence of freedom and to strengthen Europe's voice. These are the overall objectives of the Government. From the beginning our strategy has been to replace the atmosphere of confrontation, which we found when we came to office, by co-operation. The task is so great that no Government can fulfil these major objectives on its own.

Perhaps the greatest condemnation of the previous Administration was that it forfeited the confidence of workers, especially in its ham-fisted handling of industrial relations.

When we were in opposition we devised a social contract. That has been the subject of many sneers, but it was designed for one purpose—and I know because I had some hand in it—namely, the idea of co-operation as opposed to confrontation. The repeal of the Industrial Relations Act, undertaken under the leadership of my right hon. Friend the Lord President of the Council, enabled a fresh and more hopeful start to be made in industry between management and men.

It must be the experience of nearly everybody that the atmosphere in Britain's factories and workshops has much improved since the confrontation of 1973. Evidence of this comes in every day—and, what is more, the record shows it to be so.

During 1975 we lost fewer days through strikes than in any year since 1968. We have kept up the improvement during 1976, and in the first four months of this year little more than half of last year's total of working days was lost, favourable though last year was. If we keep that up in our industrial relations, we shall be on the way to a new era. [column 1462]Furthermore, the number of stoppages this year is far smaller than the figure last year. It is only the class warriors among the Opposition who cannot see what is happening in industry today.

I agree with the right hon. Lady that the social contract was a unique innovation in our political life. It is a topic to which Parliament must pay attention so that Parliament can be involved in a full discussion of these matters. Even if that situation has not been properly worked out—and I do not think that it has—not even the Leader of the Opposition could deny that the social contract has had remarkable success in improving the atmosphere of this country. We intend to reinforce the situation in due course with a new social contract to enable us to proceed with confidence in the years ahead. The Labour Government must rest not only on trade union and working-class support, as we do, but on the support of a wider group—and, indeed, we need every other group in the country, too.

The CBI knows from my meetings with its representatives that we seek its co-operation in the task of industrial regeneration. The Government cannot do this on their own. The right hon. Lady said that we paid lip-service to the situation that affects the CBI and middle managers. There is a difference between paying lip service and saying “Yes, we recognise your problem, but there are things that must wait.” This is the position in which the country finds itself.

Middle managers are a group whose voice has not been much heard, but they have behind them a great deal of experience. They are responsible for procuring new orders and for meeting export deadlines. I know that some of them feel that they have borne the brunt of events in the last few years and have regarded themselves as being between the upper and nether millstones. I wish to assure them that the Government recognise that their contribution, too, is invaluable.

Let me return to the question of group pressure. There are many well-organised and socially-valuable groups who are making clamant demands on the Government. Often, if not always, such demands are entirely justifiable. The middle managers feel that their standards have been cut. Young people in Scotland, England and Wales are finishing their [column 1463]teacher-training and are pressing that every one of them should have a teaching job irrespective of whether the resources exist to provide those jobs, and despite the great improvement in pupil-teacher ratios. Anybody who has examined the figures will know the vast improvement which has taken place under Labour and Conservative Governments, in the last 10 or 15 years.

The Child Poverty Action Group is pressing the Government for full implementation of the new scheme to give large additional allowances to mothers. The pensioners are pressing for an earlier increase in their pensions, and foremen and skilled men in industry feel that their differentials are being squeezed. All have legitimate claims. The common factor is that they are all demanding more.

Mr. Churchill (Stretford)

And the money is not there.

The Prime Minister

A beam of truth has at last emerged from the Opposition, and I thank the hon. Member for Stretford (Mr. Churchill) for his support. There is a sensible growing recognition in the country that not every demand can be satisfied and that some have to be deferred.

Mr. Tebbit


The Prime Minister

But in order to secure acquiescence in this situation, our people must feel that there is a sense of underlying fairness and good prospects for the future.

Let me tell the country once again that the first task is to beat inflation. We are well on the way. This, in turn, will enable us to reduce unemployment. Hence, the significance of the special conference of the TUC to be held a week today. At that meeting the trade unions will be pledging themselves to adhere to wage levels that will ensure that we halve the rate of inflation by the end of 1977, even though they take that decision in the full knowledge that this will cause them great difficulties and will increase comparative grievances and bring some hardship to their members. We shall then be on a level with our competitors.

That is their contribution to helping to solve Britain's economic problems. In return, what do they ask? They ask that [column 1464]unemployment should be cut. They ask that expenditure on such matters as housing, education and welfare should not be sacrificed in mad panic cuts. They also ask for a voice in economic and social policies when they are being formulated by the Government. Is that attitude unreasonable?

Mr. Hugh Fraser (Stafford and Stone)

Have an election and find out.

The Prime Minister

Is this agreement with the trade unions worth having? What do the Opposition say?

Mr. Alexander Fletcher (Edinburgh, North)

Ask the people.

The Prime Minister

Does such an agreement offer more prospect than the angry confrontation of the years 1970–74? What do the Opposition think about these matters?

Mr. Michael McNair-Wilson (Newbury)

Will the Prime Minister say what figure of inflation was used in the talks between the Government when obtaining their new pay deal?

The Prime Minister

I am not sure to what figure the hon. Gentleman refers, but what we are hoping to do with these policies is to reduce inflation to something like 7 to 8 per cent. or thereabouts by the end of 1977, which will put us on a level with most of our major competitors. That is an objective well worth reaching, and it is well worth supporting the Government to achieve that.

We all know that the Opposition's policy of confrontation failed. We now have a policy of co-operation and of trying to work things out. Let me ask the Opposition a question. If they could obtain such an agreement, would they be willing to offer in exchange for such an agreement anything—or nothing?

Let me take an example. Let us suppose that there was an industry in distress, with the prospect of a large number of workers being laid off. Let us imagine that such an industry had inadequate financial resources and was in need of drastic reorganisation if it was to face world competition. It could be Rolls-Royce, but it happens to be ship-building. Would the Opposition be willing in such circumstances in the national interest to assist the passage of such a Bill to reorganise that industry?

[column 1465]

Mr. Tebbit


The Prime Minister

I shall not give way to the hon. Gentleman. He does not yet speak for the Opposition. He may do one day, but not yet. I am asking these questions of those who will be replying to the debate.

Mr. Tebbit


The Prime Minister

Would they be willing to do so?

If so, and it is in the national interest, I ask them to overcome whatever feelings they may have about the events of a fortnight ago, when clearly there was a genuine feeling of grievance—a feeling which I acknowledged to the Leader of the Opposition. Will they be willing, in the country's interests, to let business proceed? It is the future of this industry we are discussing. It is the future of these men we are discussing. If the Opposition are willing, we shall be ready to hold out a hand so that we can resume discussions. If not, the country will know that the Opposition are still playing at their playground games.

Mrs. Thatcher

Is the right hon. Gentleman prepared to put the grievance right?

The Prime Minister

Yes, I will be willing to discuss the matter with the right hon. Lady at any time. The fact that she has a grievance does not necessarily mean that that grievance is shared. She must come half way and not insist on everything.

Like the right hon. Lady, the Government are particularly concerned about the level of public expenditure. The problem, which she did not state in this way—I will state it in my own way—is obvious. It is that the amount we have spent on social facilities, and our spending on the matters I referred to at the beginning of my speech, have increased very much faster than our national income. Despite difficulties with some of my hon. Friends in the debate in March, the Government have set out, and intend to adhere to, the planned expenditure for 1978–79. They have established a level which provides for very little increase over and beyond the programmes for next year.

The local authority world is very important in this connection because it [column 1466]accounts for about one-third of all public expenditure. Thanks to the new early-warning system for controlling monetary expenditure, the local authorities discovered and informed the Government at this early stage in the financial year—it is only two months old—that if they went on spending as they had begun, they might over-spend by as much as £400 million. The local authorities recognised that that was unacceptable and inconsistent with the programmes and the agreements they reached with the Government at an early stage. They have, therefore, agreed to revise their expenditure programmes and bring them back into line with the agreements to which they put their hand. I recognise that in doing so they will need to take some hard decisions.

My right hon. Friend the Secretary of State for the Environment has asked that there should be full consultation with the trade unions concerned, with full use made of provisions for early retirement and, where appropriate, for the sharing of services and staff between authorities. I believe that local authorities have the intention to keep to the agreed limit. It is in our interests that they should do so, for the reasons that the right hon. Lady gave.

In 1977–78, the forecasts show, manufacturing industry and the basic industries will be seeking funds to carry out fresh and enlarged programmes of new investment in plant and machinery. Manufacturing industry is a creator of wealth. Some of its profits have been very low in recent years. It will, therefore, be in competition with local and central Government when borrowing available funds. Part of the requirements of the nationalised industries for funds for expansion will also fall on the Government.

The Government are very carefully watching the development of these investment plans against the present level of public expenditure. Our policy will be to ensure that there is no return to galloping inflation as a result of the upturn in export-led expansion or in the economy generally. There is no need for panic cuts in public expenditure. We shall take whatever action is necessary to achieve an appropriate balance between public expenditure and the needs of manufacturing industry.

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Mr. Ian Gow (Eastbourne)

Will the right hon. Gentleman tell the House whether he thinks that the share of GDP taken by public expenditure could and should go above the present figure of 60 per cent.?

The Prime Minister

The level of public expenditure should not be determined by any arbitrary arithmetical figure. It should be fixed by determining the social needs of people which cannot be met individually and the requirements of manufacturing and basic industries for available funds. To try to take a simple arithmetical figure is to put oneself into a straitjacket. The country should not accept that.

I should like, if the Opposition would excuse me, to say a few words about some of the things that are going right for Britain. I deal first with engineering. The volume of new orders by overseas countries for our products rose by as much as 10 per cent.. in the three months to last February. Commercial vehicle production ordered overseas in the past six months has risen by 11 per cent. New orders for machine tools for export in the three months to February nearly doubled—they rose by 94 per cent. Steel production rose by 18 per cent. in the three months to April. The total value of all our sales of goods to overseas countries rose by 8½ per cent. in the three months to April while our imports in the same period rose much less, by 5½ per cent.

Likewise, the volume of our exports rose by 4 per cent. in the same period, whereas the volume of our imports rose by ½ per cent. I hope that the hon. Member for Stretford approves of that. The result of all this was that we had a substantial surplus in our visible trade balance, excluding oil, of £443 million in the three months to April in addition to a comparable figure of £283 million in the three months before that. Note that last year was only the second year in the past 20 years when Britain increased its volume of world trade. That is the overseas side.

Even if we include high-price oil—and I think that we should now begin to include this because we could tend to deceive ourselves if we excluded it for ever—our current account deficit in the three months to April averaged £52 [column 1468]million a month compared with £150 million a month for 1975. Let us also remember—I know that the Opposition will excuse me for saying such things—that North Sea oil is likely to save us about £1 billion this year alone.

At home we intend to continue with our policy to strengthen industry in the regions. We look for full co-operation on such matters as planning agreements to assist the regeneration of British industry. We shall also try to plan ahead to avoid bottlenecks in skilled manpower and in component requirements.

The National Enterprise Board is already using part of the funds made available to it to avoid bottlenecks in the machine tool industry. Those who have lived through past industrial cycles know that this is always where the difficulty comes. What the board is doing is financing advance orders being placed by firms on a deferred payments basis so that the tools will be manufactured now and will be ready to be taken up as the economy turns up.

The Government are financing the production of steel in advance of requirements. How necessary that is! There are still some long-term contracts from two or three years ago requiring the import of steel. That was when we had the last cramping of steel output. Is this not democratic Socialist planning? Or is this the Gestapo? The Government are taking the lead with the NEB in assisting the formation of consortia of British firms so that they may be in a better position to tender for contracts abroad when they are placed on a turnkey basis.

I think that Opposition Members who deal with these matters know that one of the weaknesses of British industry has been its inability, because of its size—there have not been super-companies—to get together in order to fulfill some of the very large orders, some of which run into £200 million and £300 million for a single project. The National Enterprise Board is taking this on board and in assisting this is filling a very important gap.

I shall not say much about the standby credit announced by the Chancellor earlier this week. I gave the right hon. Lady yesterday my view that this is a valuable reinforcement to the international monetary situation. I have [column 1469]never argued that by itself this is a solution to our domestic difficulties; nor has my right hon. Friend. But, taken in conjunction with the strategy I have already outlined and taken in conjunction with the measures that we are now following, this credit is a powerful reinforcement to what we are doing.

As to the future, when tonight is over we shall press ahead with our plans for legislation for Scotland and Wales next year, and with our policies in Northern Ireland. We shall press ahead with the Race Relations Bill, with the support of all parties, and we shall place that on the statute book. That is our path, and it is deserving of the nation's confidence.

The right hon. Lady does not need to spell out her alternative policies. She asked a lot of questions. What I did not hear stated by her when she asked the questions was what was her policy—I did not hear what was her policy—I am choking on my own words—I did not hear from the right hon. Lady what was her policy on defence, what were her proposals for the fishing industry, or what she would do about Rhodesia. She does not need to spell her policies out, but the country will draw its own conclusions from her failure to do so.

Sir John Eden (Bournemouth, West)

Will the right hon. Gentleman give way?

The Prime Minister

No. With respect, I am addressing these remarks to the right hon. Lady herself.

Sir J. Eden

I may be able to help the Prime Minister with his voice problem.

The Prime Minister

All right. I shall give way.

Sir J. Eden

I should like to raise a point that might help the right hon. Gentleman for a moment or two—and it does not really matter for this purpose what I say.

The right hon. Gentleman has just mentioned Rhodesia. Is he himself taking any new initiative to prevent the development of what appears to be a very ugly scene indeed, or is he relying solely on the initiative being taken by the United States Secretary of State? Does he recognise that first and foremost this is a British responsibility? Will he [column 1470]give some information about what action he has taken?

The Prime Minister

I am very grateful to the right hon. Gentleman.

On the matter of Rhodesia, I think that the next step is that which will be taken as a result of the meeting between Dr. Kissinger and Mr. Vorster. We are, of course, closely in touch with Dr. Kissinger about this. There are also contacts with Mr. Vorster.

That is not to say that we contract out of this situation. However, there are times when the baton has to be handed to others, and we then pick it up again. We have carried it a long way forward. For example, we have influenced American policy considerably in the American attitude towards Rhodesia, and if American strength, in every sense, can be used with South Africa in order to ensure that majority rule is established in Rhodesia, whatever the combination of countries may be, that will be a service to the whole of the people of Rhodesia. My right hon. Friend the Foreign Secretary is very closely in touch with the situation and will continue to be so.

I am much obliged to the right hon. Member for Bournemouth, West (Sir J. Eden).

I hardly like to be unkind to the right hon. Lady the Leader of the Opposition, as she has been so considerate—but I must be, because I have written it down. In political matters, I am afraid that the Opposition, as the right hon. Lady showed by her questions, have a gaping void where there should be a policy on all the matters that I enumerated. We have heard nothing of what the Opposition would do. On economic matters the Conservative Party is split down the middle between the monetarists and the pseudo-Keynesians, with the right hon. Lady oscillating between them, floating from the arms of Leeds, North-East to the arms of Surrey, East, while the right hon. Member for Penrith and The Border (Mr. Whitelaw), looking slightly bewildered and baffled, tries to cut in on this excuse-me dance that is going on.

The right hon. Lady has said that she is in favour of large public expenditure cuts now. They would hit at the young, the improverished, the poor, and they would hurt the sick. Somehow I cannot [column 1471]understand why the right hon. Lady believes that from the conflict and confrontation that would ensue she would then secure support for a Conservative Administration in the country.

The right hon. Lady would throw away the atmosphere that is beginning to pervade British industry and to spread into the rest of the country. Indeed she has already begun with what was grandiloquently called last weekend a parliamentary fight to the death—although after Monday and Tuesday I thought that it was looking a little tattered. Was there ever a more reluctant army wheeled into motion than that on this particular issue this afternoon?

If by some mischance the motion were carried tonight, there would be a General Election. I put on record my own very clear view that whatever party advantage might ensue, a General Election at this time would be against the national interest. This week the miners have pledged their co-operation for another year. The National Union of General and Municipal Workers has done the same, and I see that NALGO has done the same this morning, as have many other unions in previous weeks. Next week the TUC Special Congress will set its seal of approval. Would the right hon. Lady throw all that away? I think not. Her Shadow Cabinet must bear responsibility for not restraining her on this motion of confidence. She was reported in the Daily Express this morning as saying

“You have either got it or you haven't” .

The Opposition have got it all right; all of them. In any case, it is not for me to intrude upon the Shadow Cabinet. I leave the hon. Member for Brentwood and Ongar (Mr. McCrindle) to sum up the country's views of the Shadow Cabinet. In case the House missed it, let me repeat what the hon. Gentleman said. I am not surprised that the right hon. Lady herself had to take these decisions. The hon. Member for Brentwood and Ongar summed up the Shadow Cabinet a week or two ago like this:

“They are an unconvincing lot of also-rans” .

The Government will press ahead with our objectives. The result of the vote tonight will uphold us. I hope that right [column 1472]hon. and hon. Members who come winging back from Afric and Cathay, and Cathay and Afric, will feel that their journey was really necessary. More seriously, I hope that after tonight my right hon. and hon. Friends the Northern Ireland Ministers will be able to return to their posts of duty in Belfast.

For what purpose has all this clamour and clangour been? I say that it is to satisfy an impatient and imperious vanity.