This time last year, I said we all hoped that the 1980s would see the turning point in Britain's fortunes. Two weeks ago, on this page, Paul Johnson said that 1981 will be the year when results begin to show.

That's absolutely right. It will. Indeed, we can already see the basis for recovery.

The rate at which prices in the shops are going up is slowing down rapidly. In each of the last seven months, prices as a whole have risen by less than a penny in the pound. And some prices have actually started to come down.

The mortgage rate, with other interest rates, has started to fall. We hope this trend will continue.

Industrial relations have taken a turn for the better. Fewer days were lost in strikes last autumn than in any comparable period for 30 years. And that means fewer families going short through loss of pay.

Last year—you may not believe it, but it's true!—wages rose quite a lot more than prices. Now, wage increases are beginning to look more like what industry can really afford. People are recognising that being paid more than they produce just means high prices, falling sales and fewer jobs. [end p1]

Partly as a result of this, our sales of British goods abroad have lately been holding up very well indeed—despite complaints about the ‘strong £’.

Actually, the £ is worth no more abroad now than it was in 1974, when the last Government took office. That it's now looking healthy again is a sign of foreigners' confidence in Britain's prospects. And it means cheaper foreign goods in the shops and cheaper materials for Britain's industries.

In addition to all this, the Government has been able to do many of the things we were elected to do. Council tenants can now buy their homes. Pensioners got an increase this year even larger than the rise in the cost of living. And 30,000 more disabled people can benefit from the mobility allowance.

Unemployment

But, many people will say, what's the good of all this when there are more than 2m. unemployed and the numbers are still going up?

Fair point. But before you start blaming the Government for everything, let's look at the facts.

It is a fact that 1980 was the year of the worst world economic recession since the 1930s. No British Government has had to face anything quite as bad as this for nearly 50 years. [end p2]

Every industrial country has suffered—and in every one of them unemployment has risen sharply.

Certainly Britain has suffered worse than most, and there are three reasons for this.

Because so many children were born in the mid-1960s, we have unusually large numbers of boys and girls leaving school and seeking jobs.

There are also more women looking for work. So we have to create more jobs just to stop unemployment getting worse.

On top of that, because wages soared way ahead of production in 1978 and 1979, many British firms simply priced themselves out of the market. We couldn't even compete in our own market at home.

Walk into any store and see the way we lost our share of the home market, for example in kitchen equipment and consumer electronics. Or go into any car park, and count the number of foreign cars.

We supply fewer British goods partly because we have forced prices up by paying ourselves too much, and partly because of the restrictive practices which have been strangling some British industries. [end p3]

If we had rid ourselves of restrictive practices and overmanning years ago, more of our industrial enterprises would be thriving today. Now the moment of truth has come, and a lot of that unnecessary manpower is being shed.

We are doing now what we should have done gradually over the last ten years. I know it's more painful doing it now all at once. But if we shirk the task again, we shall never be able to compete abroad.

Of course I am deeply concerned about the plight of the unemployed, and of those businesses which are suffering severely. We shall do everything we can to help them.

We are particularly concerned about the young people, and we have promised that each one who cannot find a job will have the opportunity of work experience or further training by the Christmas following the summer term when he leaves school.

But what we cannot do is to change our essential economic strategy. That would only make things worse for everyone in the long run. It would mean that Britain would never recover. [end p4]

Public Spending

In industry, the key thing is to make ourselves competitive again. But that is only one side of the road to recovery. Bringing public spending down is the other. One of the main reasons why it is still too high is the amount we have to put into the nationalised industries.

Coal, steel, railways and shipbuilding take up so much of the taxpayer's money that if they stood on their own feet we could take 3p off income tax tomorrow.

Or the money we put into them could be used to build new schools and hospitals, or better houses and roads.

Yet despite the huge amounts of your money they absorb, they are also a main cause of rises in the cost of living. In the year to last November prices generally rose by about 15 per cent, but nationalised industries' prices went up twice as fast.

When nationalised industries' prices go up like this, they put such an extra burden on consumers and businesses that some companies can no longer compete and more jobs are lost in the private sector. [end p5]

Even with heavy subsidies from the taxpayer, some of the nationalised industries are still not efficient. You remember the subsidies from the taxpayer which went to build ships for Poland in British shipyards. None of those ships was delivered on time. Ferries ordered from another shipyard heavily subsidised by the taxpayer were over ten months late. We are not likely to get orders from overseas customers when we perform like this.

Or take steel. Last year we had a strike which meant we lost orders. NEDCNeddy estimates show we produced about 11m. tonnes. But France produced at least twice as much (23m tonnes). Germany four times as much (44m tonnes). And Japan ten times as much (112m. tonnes). Even Spain and little Belgium produced more than us. Our problem was not so much shortage of demand as failure to supply from British sources.

Good and Bad

But the picture isn't all gloomy. Some of our steel plants are now as efficient as any in the world. When British design and marketing skills are put to the best use, we can beat the world; the Mini Metro shows that.

But it is no use designing the Metro and then having a strike, bringing production to a halt. That's no way to build up confidence among buyers or dealers. [end p6]

Eleven years ago, in 1969, we produced 700,000 more cars than were sold here. Last year we produced 600,000 fewer than we bought.

In today's competitive world, badly designed, long delayed and over-priced products are not going to be bought by anyone. They mean plant closures, company bankruptcies and lost orders.

Good design, reliable delivery and keen pricing are the keys to success. If people want to keep down unemployment this year, that is how they can help.

And many British companies are succeeding. Their designers, managers, salesmen and workers deserve our congratulations. They are pointing the way to the future.

Show that we can out-perform the world: help to apply the technologies we have developed; play your part in keeping costs down; make the British product the best, and then buy it because it is the best.

That is the challenge of 1981. The Government's strategy is to keep inflation falling, interest rates falling and income tax at a level which gives incentives to the pathfinders of tomorrow. We also believe in providing financial help to cushion the effects of change and see us through the difficult days of unemployment. [end p7]

But those things are not enough. Each and every person has to rise to the challenge in his own job. Economic policies do not produce the goods. They can only provide the conditions in which the people produce the goods.

With your help, we can create a better and happier Britain, starting in 1981.