The Prime Minister (Mrs. Margaret Thatcher)
I begin by joining Michael Footthe Leader of the Opposition in the traditional way and offering my warm congratulations to my hon. Friends the mover and seconder of the motion.
My hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) succeeded, in his warm and profound speech, in bringing to us something of the spirit of Devon, where his family and his farming roots lie. He served in two Government posts in the 1970s. First, he was Parliamentary Secretary to the Ministry of Agriculture, Fisheries, and Food, bringing to his work there the skills and insights of a practical farmer. Then he served in the Northern Ireland Office, where it was not only his knowledge of farming but his profound religious sympathies and sensitivities that enabled him to make a very special and well-remembered contribution in the Province. Since then, his broad spectrum of parliamentary duties and current offices, ranging from the vice-chairmanship of the Houses of Parliament Christian Fellowship, has turned him into almost a one-man [column 54]institution in this House, widely respected and warmly regarded in every part of it. We are grateful to him for his speech.
I also pay tribute to the speech made by my hon. Friend the Member for Crosby (Mr. Thornton) for seconding the address. He is Merseyside born and bred, and his enthusiasm and understanding of that region and its people came through vividly in his speech. He has the unique distinction of having served for over 20 years as a senior Liverpool river pilot, a job which he left to enter the House in 1979. This time he contested Crosby, where, by some extremely skilful and effective navigation, he steered his electoral craft safely to port at Westminster. Like his great Conservative predecessor, the late Sir Graham Page, he will be based at this parliamentary port for many years to come.
I listened carefully to the speech of the Leader of the Opposition. It seemed to me, on listening to him, that our procedures had scarcely been interrupted by an election, but I gently remind the right hon. Gentleman that he put out that message during the election and that the people totally and utterly rejected it. He spoke about unemployment, and indeed I shall do the same, but not one word that he said would have created one extra job that would have created any extra wealth in Britain. It is easy to speak about the tragedy of unemployment. We have to seek ways of alleviating it and creating genuine wealth and genuine jobs in Britain.
The right hon. Gentleman spoke about pensioners. I remind him that the pension now is at a higher real level than during the lifetime of the previous Labour Government, and that during a recession. He spoke also about the National Health Service. Again, I remind him that there are more doctors, nurses and patients treated in the NHS now than when he left office.
The right hon. Gentleman spoke about relations between East and West strictly on the basis of nuclear accountancy. I shall hope to put them in a much wider context than that. He spoke about a joint decision on the use of cruise missiles when they are deployed in Britain. Those matters were reviewed before the election and the answer was given in a full parliamentary reply. The President of the United States was asked whether Britain would have a veto on the deployment of those weapons and their firing, to which he replied “Yes” . It goes deeper than that. No such decision would ever be made without it being made jointly. It is, in fact, deeper than a veto.
In this debate the House will want to do more than repeat the debates of the general election. The opening of a new Parliament is an occasion to look to the future. Two of the most serious challenges that we face are set out in the first sentence of that part of the Gracious Speech which deals with domestic policies. It says:
“My Government will pursue policies designed to increase economic prosperity and to reduce unemployment.”
Mr. Dennis Skinner (Bolsover)
Is the Prime Minister aware that one of the reasons why she managed to get a majority is that her party had the powerful aid of the media and that that same media told the electorate that the Tory policy on mortgage rates was to keep them down? Many people know today that the Tory policy on mortgages has been shot to ruins. All the collaboration between her supporters and the people in the building societies has been proved to be false and has resulted in a massive increase of 1.25 per cent. today.
[column 55]The Prime Minister
The media may take the voices across the air to the electorate, but it was the Leader of the Opposition's message that was rejected. I do not disguise my disappointment at the fact that mortgage rates have risen, especially as interest rates were reduced in the middle of April to 10 per cent. and, since the election, the base rate has been reduced to 9.5 per cent., only 0.5 per cent. above what it was when the present mortgage rate was fixed. Therefore, of course I am disappointed that the mortgage rate has been increased by 1.25 per cent. Nevertheless, we understand the reasons that have led to that. The demand for mortgages is so great that the building societies must obtain more savings to meet that demand, which has arisen because Tory Governments give greater opportunities for home ownership than Labour Governments ever have.
I return to the main concern of this House and the people outside. Unemployment is a symptom, the most painful symptom, of the fundamental problems which Britain has long faced. It is the result of failure to compete, of pay well above anything justified by output, of restrictive practices and of past inflation. On top of those problems, we, like other countries, have suffered from the deepest world recession since the war.
When the Government took office four years ago, we made it clear that the problems of decades could not be solved in the lifetime of one Parliament. We addressed ourselves to those fundamental problems, and by the end of our first term we had brought inflation down to its lowest level since 1968. As figures published in the few days since the election show, production has risen and productivity has reached new record levels. Retail sales are rising and the underlying increase in average earnings is lower than at any time since 1969. We have achieved that without resort to wage or price controls, which, at best, have a limited life and only store up trouble for the future.
We have also to consider our performance against that of our competitors. Even at 3.7 per cent., our inflation is higher than in Germany, the Netherlands and Japan. Therefore, we must follow policies that will reduce inflation still further. The underlying increase in average earnings is still too high in relation to what we produce and the performance of our competitors. We cannot weaken our efforts if industry and commerce are to compete with the rest of the world and gain prosperity and jobs in Britain. We shall gain prosperity and jobs in Britain only if we can compete with the rest of the world.
The increase in imports of manufactured goods, to which the right hon. Gentleman referred, sounds the same warning. There is plenty of demand in Britain and it is up to British industry to produce the right goods to meet it. We cannot afford to relax in the belief that the end of an economic cycle will automatically bring recovery. It cannot and it never did. Moreover, we reject the view held by Labour Members that Governments can ordain a sustainable growth in activity in the economy, whether by massive expansion of public borrowing or by printing money.
The Government have an important, indeed a vital, role. It is to create the conditions and framework which encourage recovery and growth to take place, and which, if sustained, will lead to the generation of new jobs. How fast that will happen will depend both on world conditions and on how well people identify and seize the new opportunities. [column 56]
We shall pursue our strategy for recovery and jobs, first, by helping business to cut costs. We can do that through following sound financial policies which keep inflation down and help to keep interest rates down. We can and are doing it through reducing taxation on business and we hope during the present Parliament finally to abolish Labour's pernicious tax on jobs, the national insurance surcharge. The Opposition talk a lot about unemployment, but they did not hesitate to put a tax on jobs, which made the position worse. We have taken off £2 billion of tax and put the money back into the private sector.
We can help to cut costs in business by limiting the increase in local authority rates. Rates are now the biggest tax borne by industry. In a major city I recently visited, one third of the city's firms were seeking to move out in order to avoid a rate burden which for some of them approached £2,000 per employee. Early in the new year we shall introduce a Bill to control the rates set by certain high-spending authorities. We shall seek reserve powers to limit rate increases for all authorities, should it prove necessary. That legislation will be very welcome, not only to domestic ratepayers, but to industry and commerce alike.
Some of the reforms that I have just mentioned already apply to Scotland. My right hon. Friend George Youngerthe Secretary of State for Scotland will present separately the valuation and rating reforms that he proposes for Scotland.
We shall also bring forward proposals to abolish the Greater London council and the metropolitan county councils, which have been shown to be a wasteful and unnecessary tier of government.
Mr. Harry Ewing (Falkirk, East)
In view of the Prime Minister's determination to take from the local authorities the very important powers that they have had through the years, can she explain to the House what the purpose of local authorities will be after she has assumed dictatorial powers over them?
The Prime Minister
It is the responsibility of the Chancellor of the Exchequer to try to determine the overall level of public expenditure and the proportion of national income that is taken by public authorities and taken out of the pocket of the people. In recent years the expenditure of local authorities has increased enormously. There used to be certain customs and conventions which governed the relationship between local and national Government. In recent years, those conventions have totally broken down. That is why we are taking powers to limit the increases in rates, and that view has been overwhelmingly endorsed by the electorate.
Cutting costs in all those ways is the first element in our strategy for jobs. Secondly, we can use the tax system as a positive instrument to encourage the creation and the expansion of small businesses, and as an incentive to efficient management. The Finance Bill that we introduced before the election went in that direction, as indeed did previous ones. We shall introduce another Bill immediately to further this work and to restore the tax reliefs which, before the election, the Opposition deliberately withheld from nearly 1 million people.
Mr. Richard Wainwright (Colne Valley)
Earlier in her speech the Prime Minister explained the building societies' decision today in terms of the great increase in the demand for mortgages. That being so, will she now tell [column 57]the House whether she intends to persist with the three months' old decision—taken in very different conditions—to raise the threshold for mortgage tax interest relief and thus increase the demand for mortgages?
The Prime Minister
Had the right hon. Gentleman listened to what I had said, he would have heard that we are to reintroduce that Bill. If he refers to the debates that governed the limitation of mortgage tax relief at the time, he will be amazed that the level has not been raised already. He will also know that in the big cities of the south-east about one third of new mortgages are for more than £25,000. The failure to have extra tax relief is a great burden on young married people. I note that the hon. Gentleman wishes to retain that burden. We do not.
The third element in our strategy is to continue our substantial support of new technology. In moving the Address, my hon. Friend spoke of the need to adapt to change. We must adapt to change if we are to succeed in the modern world. To those who are fearful of industrial and commercial change, we point out that the real threat posed by the new technology is that our competitors may use it and we shall not.
That is one of the biggest challenges that we face. Japan is ever quick to adapt new processes and to adopt new techniques. Her unemployment rate of 2.5 per cent. is the envy of many, and yet a smaller proportion of her work force is engaged in manufacturing than ours—25 per cent., against 27 per cent.—and that proportion, like ours, has declined.
New technology will flourish only in conditions of competition. We have already ended the monopoly in telecommunications and we shall reintroduce the Bill to denationalise British Telecom. With all the support that we are giving to encourage new technology, to launch new products and to bring about new research by the universities, the Government and industry in combination, we are pointing the way for Britain to be in the forefront of new technology and one of the leaders of technological advance. Our traditions point that way and our skills lead that way. Our policies are taking us that way, and must do so if we are to get the jobs and the new products of the future.
The fourth element in our strategy for jobs and for recovery is the use of extensive systems of training. Without adaptable and highly skilled people, our economy cannot achieve its full potential. British industry clearly accepts this analysis and our chosen method of improving training for young people. We need 460,000 places for the new youth training scheme—the most advanced ever seen in the country. I am glad to tell the House that 415,000 places have already been identified.
Fifthly, we shall take forward our programme of trade union reform. All too often we hear trade union leaders defend overmanning and inefficient working practices as if they were defending their members' jobs. The truth is that by holding down productivity and preventing the introduction of the more efficient working practices which our competitors take for granted the trade unions are destroying the very jobs which they claim to defend.
It is because trade unions are such powerful agencies for good or harm, for creating new jobs or destroying existing jobs, that we are convinced of the need to ensure that that power is used democratically and responsibly. That was the theme running through our 1980 and 1982 Employment Acts, by which we curbed the abuse of [column 58]arbitrary power in the closed shop by providing for shop floor ballots, and on the picket line by making secondary picketing unlawful. Those measures have enjoyed the support not only of the British people as a whole, but of a large majority of trade unionists.
We shall now move forward along the lines set out in our 1982 Green Paper, “Democracy in Trade Unions” , to ensure that the ballot box, not the bully boy, shall prevail.
Mr. Skinner
What about the CBI?
The Prime Minister
It is fully in support of what we are doing.
We shall give union members the right to hold secret ballots for the election of governing bodies of trade unions and to decide periodically by ballot whether their unions should have party political funds. We shall also curb the legal immunity of unions if they call strikes without securing the prior approval of those concerned through a fair and secret ballot.
That is our strategy for jobs and for recovery. I shall go through the five points again. It is a strategy by which Government can help to cut the costs of business, in which the Government use taxation as an incentive to enterprise and efficient management, in which we have extensive programmes for supporting new technology, in which we have extensive training programmes and in which we embark on trade union reform. It is a strategy which tackles the fundamental problems.
Neither those measures nor any Government measures can guarantee a recovery or the creation of the new jobs that we need. They help to provide opportunity, but that opportunity can be grasped only if our industries—work force and management alike—have the will, the vitality and the flair to produce the products and services that will sell. That is the nature of the essential partnership between the Government and the industry. I believe that there is now a much wider understanding of the link between the prosperity of our people and the performance of our industry and commerce.
The Leader of the Opposition spoke of the welfare state. Let us be clear that there is no conflict between more competitive and profitable business and the range of social provision and care that we all wish to see. Indeed, competitive and profitable business is the essential condition for the care and provision that we all wish to see.
Mr. Sidney Bidwell (Ealing, Southall)
Does the right hon. Lady expect to achieve a revolutionary advance in productive technique without the co-operation of the trade union movement, and to what extent does she expect to consult the trade union movement and the general council of the TUC?
The Prime Minister
The TUC and the trade unions are always consulted, and were on the Green Paper that we introduced. They will again be consulted. Much of the legislation this time will give ordinary trade union members a bigger say in the life, work and decisions of their trade unions. It will be strange, but not surprising, if that is severely opposed by Labour Members.
I was speaking about the welfare state and the need, in order to finance it, to have a thriving and flourishing private sector that is competitive and makes profits. That need can be shown by looking at a number of figures. To increase the retirement pension by £1 week, we need £350 million of extra revenue; to build a new 300-bed hospital [column 59]and run and staff it for three years, we need nearly £50 million of extra revenue; to reduce the basic rate in income tax by 1p, raise tax thresholds by 5 per cent., or increase child benefit by £2 a week, calls for an extra £1,000 million every year for each of those things. That is the challenge we face. The welfare provision that we all want can be provided only through industrial and commercial success.
We have protected, and shall continue to protect, the social services. The absurd scares put about during the general election served only to give us the chance to spell out our magnificent record in the social services, maintained through the fiercest world recession for 40 years.
Mr. Jack Straw (Blackburn)
In view of that magnificent record, does the Prime Minister guarantee to uprate unemployment benefit in line with prices?
The Prime Minister
No, nor did I give that guarantee during the election, as the hon. Gentleman knows full well. That point was made during an earlier speech.
Our approach goes further than protecting the weak. We aim to give the British people the opportunity to aspire to, and achieve greater personal responsibility and the pride of ownership.
Mr. Laurie Pavitt (Brent, South)
rose——
The Prime Minister
I must get on. That people should be able to own their own homes is at the heart of our philosophy. The link between liberty and property ownership goes deep in our history. That is why we are proud that during our first term one million more families became home owners, giving them a stake not only in the present but in the future, and 500,000 of those families were council tenants. We gave those council tenants the right to buy their homes, in the face of ruthless and prolonged opposition. We shall continue to pursue that great social reform. We shall extend to the many the chances and choices that were previously reserved for the few. The Bill introduced in the last Parliament will shortly be brought forward again.
The domestic programme outlined in the Gracious Speech is substantial. On the international scene, we begin this Parliament at a time when the major industrialised countries are seeing clear signs of recovery and when there is growing confidence in the prospects for that recovery. One of the limiting factors on the rate at which it can take place will be the problems in which a number of the developing countries find themselves because of debt. International debt remains disconcertingly high. Nevertheless, over the past 12 months the international financial community has acted with speed and skill in handling individual cases. There will be difficult, even critical, times ahead, but, with the growing recovery, interest rates well below peak, and the more prudent policies pursued by both the debtor countries and the lending institutions, the prospect is better than 12 months ago. Britain has contributed to that improvement, and other countries cite the British example as the one to follow. We speak with new authority and so are better able to pursue our aims and defend our interests.
Freedom and justice are our most priceless possessions. We value them for ourselves and aspire to them for others, [column 60]because the cause of freedom and justice knows no national boundaries. The more widely freedom and the rule of law become established in the rest of the world——
Mr. Skinner
What about the freedom of local authorities and trade unions?
The Prime Minister
I am trying to give freedom to individual union members to have more of a say and to give justice to people. The more widely freedom and the rule of law become established in the rest of the world, the more secure they are at home. We shall defend them always, but we cannot defend them alone. We need allies. We shall continue to support and strengthen those alliances and partnerships that work for freedom.
The North Atlantic Treaty Organisation, which for so long has kept the peace in Europe, is the surest guarantee of that peace for the future. The European Community, founded on the desire to end war in Europe for ever, is now a vital area of democracy and stability which, in an uncertain world, we seek to preserve and extend. At the same time, we cherish our relationship with the United States, that great citadel of liberty and justice, which over the years has shown unparalleled generosity to the peoples of Europe and the wider world and is the mainstay of the defence of the West. Our values, way of life and security depend on these alliances and partnerships.
Mr. A. J. Beith (Berwick-upon-Tweed)
rose——
The Prime Minister
I shall give way if the hon. Gentleman wishes to intervene on this point.
Mr. Beith
If the right hon. Lady believes, as I do, the words that she has just uttered, why does she believe that circumstances might arise in which she might have to launch a nuclear war because the Americans had refused to do so?
The Prime Minister
The hon. Gentleman has completely misunderstood. We keep an independent nuclear deterrent as a last resort. It is there to deter, so that at no time should this country ever be threatened by anyone who has nuclear weapons, and if we did not have them the only alternative would be surrender or capitulation. That is not a course of action that we would take.
Our values, our way of life and security depend on those three alliances and partnerships. They have met and surmounted challenges before and will meet fresh challenges in the coming years, for the West is confronted by a power that has failed to solve its own internal problems and seeks escape from these in ever-increasing military expenditure and display.
There was a time when countries of the developing world criticised what they regarded as Western imperialism and looked to Moscow for aid and support, but the world has changed. They have seen the new imperialism at work in eastern Europe, Afghanistan and Cambodia. They have learnt the lesson that it is the West that supports the rights of people freely to choose their own way of life, their Governments and their policies, and that the Soviet Union is the new imperialist. The West, too, has shown the route to economic prosperity and has provided economic aid to help the poor of the world.
This a time for the Western democracies to recover the confidence that some were in danger of losing and to redouble their efforts to defend and spread the values that [column 61]have been tested by time and that offer incomparably more to mankind than the bankrupt ideology of Soviet Communism.
The Government will stand firmly together not only with its partners in NATO but with its partners in the European Community. The debate about British membership is over, once and for all. Now we shall turn our energies to developing the Community, so that it can better serve the interests of all its members and further those interests in the outside world.
That process was launched at Stuttgart last weekend. The public message from the European Council was that the discussion was dominated by budget matters, and in part it was. We were determined to secure a reasonable British rebate this year. But there was a wider significance—a process of fundamental reform has now been launched.
First, the Community has agreed a programme for firm decisions on its future financing, including—and this is vital for us—a fairer distribution of the burden. Secondly, we are now to examine in detail measures to curb the relentless growth in expenditure, especially on the common agricultural policy. My hon. Friend the Member for Torridge and Devon, West spoke about that when he spoke about surpluses. Thirdly, we are not prepared simply to agree that the Community's resources should be increased. Just to deluge a problem with money is not a solution, but a substitute for a solution. So those who want more money will have to prove their case and show that the present resources are being spent effectively.
Mr. D. N. Campbell-Savours (Workington)
Will the Prime Minister give an assurance that she will not increase Britain's VAT contribution to the Community during this Parliament?
The Prime Minister
Had the hon. Gentleman been listening, he would have heard me say that those who want more money in Europe will have to prove their case and show that the present resources are being spent effectively. We will consider the case, but we remain to be convinced. As was intimated in the communiqué, which has been placed in the Library, we could not possibly consider an increase in own resources—VAT mentioned by the hon. Gentleman is only one method—unless there is a fairer distribution of the burden and strict control, not only of agriculture expenditure, but of other policies in the Community. I have made it clear that we will consider the case, but we are not committed in any way.
We now have a golden opportunity to devise a more reasonable and equitable basis for the Community's finances so that the problems that have bedevilled it in the past do not recur. There is now a real prospect of an effective, outward-looking organisation of European states, well designed to bring about a more prosperous future for its people and to carry its benefits to a wider world. We have worked for that opportunity for four years and we shall make the most of it now that it has arrived.
All the achievements that we seek, both at home and abroad, will be at risk unless we and our allies maintain adequate defences. We threaten no one, we do not seek superiority, but we must be strong enough to deter. This Government will do all in their power to ensure that, together with our allies, we have and retain that strength.
We would like to maintain our security at a lower level of arms and expenditure, but it is no good disarming in the[column 62] vague hope that the Warsaw Pact will follow our example. History shows that one-sided gestures are at best futile, and at worst dangerous. The British people have seen through the arguments for one-sided disarmament. They have rejected proposals that would have weakened this country's defences and those of our allies. The right course is multilateral disarmament.
We shall examine every proposal from the Soviet Union with an open mind, but an open mind does not mean a simple mind. We shall examine every proposal rigorously and test it against our clear criteria. It must improve, not worsen, the balance of forces. It must preserve, not prejudice, our way of life. Arms control agreements must be properly balanced and strictly verifiable.
Meanwhile, the West has tabled a whole series of disarmament proposals. If they are accepted by the Soviet Union, the world will be a better place. There are proposals, and it is for the Soviet Union to accept them. If they are accepted, the world will be rid of the threat of chemical warfare—the Soviet Union has vast superiority in that area—and those horrible weapons will have been banned and destroyed; a complete class of nuclear weapons—the intermediate land-based missiles—will be eliminated; holdings of strategic nuclear missiles will be halved and warheads reduced by at least one-third; and the conventional armed forces in central Europe will be reduced by hundreds of thousands of soldiers and airmen, so that equality exits between the two sides.
That would only be the beginning. The mistrust and fear on both sides would diminish. We could go on to agree further balanced and verifiable reductions in the armaments of both sides. The prize is great, but we cannot hope to achieve even a small part of it unless we maintain our guard. We will work for peace while we defend our freedom.
I have spoken about the main themes of the Gracious Speech. It shows a continuing purpose with its four predecessors and with those which, I am confident, will be presented to this House for many years to come. We are engaged upon a deliberate and sustained endeavour—to harness change to our advantage, to liberate the inventive genius of our people and to uphold the law and defend freedom and justice. We have dared to address Britain's basic problems. We have dared to persevere. We are proud to have received the endorsement of the British people.