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Mr. Leighton : The hon. Gentleman has a bad habit of interrupting my speeches after one or two sentences. This is a short debate and I intend to adopt a self-denying ordinance so that I do not hog too much time. I shall therefore not give way.
Both the TUC and the CBI said that unemployment would reach at least 2.25 million this year. The TUC said that more pessimistic forecasts predicted that it would rise to 3 million in 1992-93. Since we took that evidence, unemployment has exploded even more devastatingly. It has already reached 2.25 million, although we are only half way through the year. In the six months to November 1990 the average increase in unemployment was 25,400 per month. In the past six months it has averaged 80,200 per month. Unemployment has increased for 14 consecutive months and the trend is accelerating and is set to continue.
Not only does this cause a huge pool of human misery, but recession is expensive for the public finances. The Select Committee on Treasury and Civil Service has estimated that each additional 100,000 unemployed people cost the Exchequer a further £300 million in benefit payments--and that does not include the taxes forgone. It is no wonder that the Government's books do not balance and they are being forced to borrow billions of pounds this year and even more next year.
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Unemployment is a lagging indicator ; it is a considerable time after the economy picks up before employment improves. So when will the recession end? The Government have been claiming to see vague stirrings. They claimed that there would be a recovery in the second half of this year, but we are already in July and it is not happening. The CBI and the IOD pointed out that not only manufacturing suffers ; so do clerical jobs, advertising, retailing and financial services. Only this week we learnt that disastrous conditions in the high street forced the Burton group to close 100 shops and sack 1,600 staff after making losses that will amount to £177 million in the year to August. The number of companies that have collapsed in the first half of this year has risen by 66 per cent. The IOD told us that the housing market is important. The total number of people living in homes on whose payments they are in arrears is now just under two million--equivalent to a population double the size of Birmingham's. The number of households more than six months in arrears rose from 87,360 in March 1990 to 209,620 in March of this year--it doubled. Property repossessions are outstripping the number of homes being built to meet social needs--primarily homelessness.My conclusion is that there is little comfort in prospect in the medium term. As the recession is strong in the service industries, London and the south-east are in its grip and are bearing the brunt. In London there are more than 26 people chasing every notified vacancy, unemployment in London was more than 50 per cent. higher in April this year than it was a year before, and the rate of corporate bankruptcies has tripled. The Evening Standard Investors in Industry survey for April 1991 found that 94 per cent. of companies in the capital are likely to reduce or at best maintain their work force in the coming year. The outlook is bleak and many people will suffer.
The Committee looked into the exchange rate mechanism--
Mr. Janman rose --
Mr. Leighton : We asked each of the witnesses their estimate of the effects on employment of entry into the ERM. We were astonished that none of them had made such an estimate. There was a time when full employment was a national aim and when policies would be evaluated, among other things, for their effect on it. No more, apparently. One TUC witness said that the TUC did not have a forecast of the impact of entry on employment. Later he said :
"What impact ERM will have on the economy I am afraid I do not know."
Many might find it surprising that, despite that, the TUC was all in favour of entry, although it believed that we joined at the wrong rate--we should have joined at DM2.70 instead of DM2.95.
Neither the CBI nor the IOD had calculated the effects of entry on employment. Although the IOD had not been in favour of entry, however, it had studied its baneful effects on Ireland and France. Our report states :
"We believe that the full implications on employment levels of joining the ERM were not sufficiently discussed or understood before entry, and even now are not widely recognised."
The Department of Employment does not make estimates of the effects of ERM either, but we asked the Department whether it had made any studies of ERM's effect on France and Italy. We received a letter from the
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Secretary of State in which he quoted a memorandum from the director general of the National Economic Development Council and the November 1990 issue of the National Institute Economic Review. That was worrying because it told us that ERM membership had cost France 700,000 jobs and Italy a million jobs.The March issue of CBI News included an article by Professor Douglas McWilliams, the CBI's chief economic adviser. Speaking of the effect on the French economy, he said :
"How has the French economy performed since the start of serious EMF membership of 1983? The initial effect was slow growth. French GNP rose by below trend for five consecutive years from 1983-87 with a cumulative shortfall of 4.5 per cent. of growth compared with productive potential. The main feature of this recession was that output was depressed for an unusually long period".
The article went on to say that wages were reduced. It continued : "Nevertheless, reducing inflation still required rather slow growth associated with rising unemployment"
a rise in the number of jobs lost of approximately half a million. His last paragraph is extremely revealing and worrying. He says that "the French experience suggests that if British membership of the ERM is successful in reducing inflation it is likely that unemployment will rise to about 500,000 above its 1990 level at some time before 1994. And if Britain is unsuccessful the rise in unemployment could be substantially more than this --perhaps as many as a million or more."
If the French experience is anything to go by, membership of the ERM could add an extra million to the dole queue, unemployment could be very much higher over the period of the next Parliament and economic growth would be slower. That is worrying because the parties seek to finance their programmes from economic growth.
After speaking about the DTI's 1992 awareness campaign, Mr. Morgan of the IOD said :
"The ERM situation poses a bigger problem than 1992 did, in terms of adjustments required and the awareness required."
Why have we not had an explanation or a debate about the matter. On the day when we interviewed the CBI, on 13 March, an article in the Financial Times said that ERM entry meant that we had
"to change our whole way of life."
If that is to happen, there should be an explanation. Commenting on the French experience the CBI said :
"The French economy has been slow in responding to the discipline that ERM membership brought to French firms."
Can we be any quicker, and what exactly is it that we have to do? The normal way for divergent economies to adjust to each other is by changes in their exchange rates. If that is ruled out by the ERM, the IOD told us that if Britain's inflation was higher our competitive position would deteriorate from the day after we joined. It said that British companies
"had to start at high speed to make up for any lack of investment, and any lack of training and skill, if they are to control their unit labour costs, and stay competitive in the traded sector". Tying the pound to the deutschmark means that Germany is the benchmark country. If our inflation is higher than that of Germany, as it is, if our productivity is lower, as it is, if our costs rise faster, as they do, we lose competitiveness from day one and cause higher unemployment. To survive we would need, at double quick speed, German levels of inflation, investment, productivity and unit costs.
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What is happening in the real world? Everyone says that investment, the seed corn, is vital, but investment is in reverse. In his Budget statement the Chancellor said that investment across the whole economy would fall by 10 per cent. In the key manufacturing centre it fell 20 per cent. between the first quarter of 1990 and the first quarter of 1991. All our witnesses said that productivity was the crucial deciding factor--but it is in reverse. The Department of Employment figures show that output per head in March was 1.9 per cent., nearly 2 percentage points down on the previous year and the largest decline since 1981. While we were going backwards, German productivity rose by 4.5 per cent. in the same period.What about wage costs? The June issue of the Employment Gazette reported that wages and salaries in the three months to March 1991 were 11 per cent. higher than in the same period last year. Average earnings in manufacturing during the same period were 9 per cent. higher than last year. It is fair enough to have a rise of 9 per cent. when productivity is rising by the same percentage, but it went down by 2 per cent. That means a unit wage cost rise of 11 per cent. How does that compare with our competitors? The CBI told us : "Our unit labour costs at the moment are going up probably twice as fast as the best of our European competitors. That is not sustainable."
Not sustainable means that British firms lose market share, factories close down, more workers are thrown on the dole, and Britain is blighted and becomes a depressed area with chronic mass unemployment. It also means that the pound cannot be maintained at DM2.95. The high interest rates required by the vain attempt to keep it there further reinforce the recession and push investment and productivity into a downward spiral. Pressure on the pound then leads to a sterling crisis which blows the pound out of its unrealistic ERM parity--but only after great damage has been caused to British industry.
A successful ERM would mean some sort of speedy structural revolution in the British labour market, a major change in the behaviour of wage bargainers. It would also mean a cut in the real wages of British workers. According to the TUC spokesman, that is unlikely because he said that that would be,
"unrealistic, not to say immoral."
The pattern in Britian is for wages to shadow and compensate for the previous year's inflation. To be competitive in the ERM, however, wages would have to be linked to German--not British--inflation. That means that the real wages of British workers would have to come down. Do they know that? Have they been told? Do they agree? The future is likely to contain a great deal of industrial conflict as the attempt is made to force British wages down. We shall see many more incidents such as that at Rolls-Royce with employers unilaterally seeking to enforce a pay freeze.
What sort of lead are British workers receiving? I asked the IOD whether it thought that the spirit on a ship was the responsibility of those on the upper deck and it said yes. I asked whether it thought that directors should set an example and again it said yes. What kind of example is being set by those at the top? We are currently witnessing a wave of blatant corporate greed with those at the top agreeing to pay each other in telephone numbers with increases of 20, 30, 40, 50, 60, 70, 80 or more per cent.
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--one of them even gave himself a rise of 160 per cent. Those who run the privatised monopolies are leading the way.This week we heard about Robert Evans, the chairman of British Gas. He is not content with a 66 per cent. pay increase because in his £500,000 four-bathroom house he has had installed £28,000 worth of gas fittings, showers, dishwashers, gas fires, kitchen appliances and gas street lights, and all for free. Apparently he is testing them. Everyone would like to conduct tests like that. What is sauce for the plutocratic goose must be sauce for the low-paid gander. If the captains of industry can help themselves and fill their pockets with gold, how can they argue that their foot soldiers should take pay cuts? It is likely that those at the bottom will want to take their lead from those at the top.
It is plain that the baneful effect of the ERM is to deepen and lengthen the recession. All the domestic arguments and the requirements of our economy cry out for a cut in interest rates and all our witnesses asked for that. The Institute of Directors wanted a 4 per cent. cut this year. However, membership of the ERM means that interest rates can no longer be used for the benefit of the domestic economy. As the Chancellor said, the overriding purpose of interest rates is to secure the pound in its ERM band. That means that interest rates stay higher than would otherwise be the case, the recession is deepened and prolonged and the unemployed pay the price.
Since we joined the ERM in October, unemployment has risen by well over 600,000. Fixed parities can work only if economic convergence comes first. A strong currency is the reward for economic success and performance. That cannot be achieved by fiat or passing a resolution.
The Institute of Directors drew our attention to monetary union and the introduction of a single currency before convergence in Germany. That led to the shutdown of the east German economy and the creation of mass unemployment. The same pressure, in a more modified form, would operate here.
All the witnesses agreed that skills and training were the key to success. The CBI said :
"We cannot get away from the fact that the UK produces fewer 16 year old school leavers with sensible qualifications, we keep fewer of our school children on beyond the age of 16 than most of our industrial competitors, we produce fewer engineers and vocationally qualified people at graduate level than most of our competitor nations. It is that sort of skills revolution which we have to make work this time before we try anything else."
The Institute of Directors likewise said that it
"believed that skills and training are the key factors in determining prosperity."
The nation has to invest in its human capital. There is no representative body at national level to set targets for vocational qualifications and to oversee and monitor progress in their implementation. Here, the Committee makes a major recommendation. We believe that, in consultation with the training and enterprise councils, the local enterprise companies in Scotland, and other relevant bodies, the Government of the day should set national targets for improvements in levels of skill and qualifications. We hope that the Government will accept that recommendation and that responsibility on behalf of the nation.
I thank hon. Members for listening so patiently and I commend our report to the House.
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8.1 pmMr. Andrew Rowe (Mid-Kent) : I hesitate to follow the economic guru, the hon. Member for Newham, North-East (Mr. Leighton), in the more arcane arguments on the economic basis of the present situation, because I do not have anything like his expertise in the subject. However, when he claimed that we were looking for a change in our way of life, I could not help feeling, as he piled gloom on gloom, that we were listening to an east London way of death. I thought that he claimed that there was no serious recession on the continent. Whether that is true or not, a number of countries on the mainland of Europe have unemployment rates that are not only a great deal higher than ours but have remained consistently higher over a number of years. France is a notable example.
When we are talking about new ways to change our attitudes, it is encouraging to hear such a spirited defence of keeping wages and inflation under control. I will leave it to those of my hon. Friends who I know wish to follow me in the debate, and who are better qualified than I to do so, to explore further the likely impact of the proposals for a minimum wage linked to the average wage. That fits uneasily with the hon. Gentleman's argument that we should keep wages under strict control.
I thought that I heard the hon. Gentleman say that the Institute of Directors was looking for a 4 per cent. reduction in interest rates in a year. It is still July, and since October our interest rates have come down by 3.5 per cent., so I am not discouraged.
Mr. Leighton : That includes last year.
Mr. Rowe : The hon. Gentleman is correcting me. Apparently the Institute of Directors wants interest rates to come down by 4 per cent. this year. I view with some reserve this headlong rush to cut interest rates--a policy which I know is much beloved by Labour Members. Most of our present troubles stem from the over-cutting of interest rates that we went into because we were afraid of a worldwide recession. I vividly remember that the Labour party clamoured for a much bigger cut in interest rates. If we had followed that siren voice, we would be even further on the rocks than we are now.
We are at the beginning, but far enough along the path to see that it is a solid beginning, of a serious change of climate. In 1979, there was a strong belief that training was something that one did only in the employer's time, only at the employer's expense and, best of all, if the employer could persuade the Government to pay for it. That attitude has changed for the better. We now have an understanding that training is a shared responsibility. Few people in employment today believe that what they know now will be sufficient for what they have to do for the rest of their employed life. They are aware of the need to retrain several times during their working life. They see it as a shared responsibility between the individual, the employer and the Government.
The Government have been imaginative in, for example, the introduction of training credits. Nothing makes it clearer for an individual that he shall have control over the sort of training that he wants and the quality for which he is looking than the knowledge that he has in his hand the finance to pay for the training that he needs. I hope that, as the CBI said to the Select Committee, it will
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be possible to enlarge the scheme rapidly. It is a good scheme which I should like to see tested, although not for so long that it cannot be expanded if it shows promise.The Government have been extremely imaginative in their policy of allowing people access to courses and other forms of higher and further education at a much later stage than simply that of leaving school. I share the anxiety expressed by the hon. Member for Newham, North-East. Too many youngsters still leave school inadequately educated to go straight into a job. I derive great comfort from the fact that many of them rapidly realise that they are banging their heads on a ceiling of inadequate qualifications, and take the advantage that we have provided of going into further and higher education at a later stage.
There is a marked change of climate within universities and colleges. They are now far more entrepreneurial because they realise that if they are to survive, they will have to sell a product that students want. When I taught at a university, we taught what we were interested in and if the students did not bother to come, we went on teaching it nevertheless. Now, if the students do not come, the department closes, so departments are becoming more aware of the need to tailor what they teach to what the students want. I can give an example from my area. Few students at Kent university do not learn a foreign language at some stage, because they realise how vital that will be in the European Community.
The hon. Member for Newham, North-East and his Committee were anxious about quality control in training. That is another aspiration which I share with the Committee, but I should not like the hon. Gentleman to underestimate the crucial significance of the national vocational qualification. As that operation spreads its net and becomes more widely used and known, it will make it much easier for individuals who may not have had a formal education to get credit for what they can do practically. Furthermore, it will show them when they get to a certain level that they have the same access to higher education that they would have had through the more traditional book learning that used to be the only way in. That is enormously important and we should not underestimate it.
Anything that my hon. Friend the Minister can do to diminish the bureaucracy of those national vocational qualifications would be welcome. I have seen some of those NVQ demands and they extend to many pages. They have been refined and re-refined for the highest possible motives, but they do not half make it difficult for people to extract the best that they can from the system.
There is a growing understanding among employers. The Select Committee's report suggests that employers now reckon to provide £20 billion worth of training. To give an example from my county, in Thanet the Kent training and enterprise council has helped to put together the Thanet skills initiative whereby more than 20 employers are coming together to try to influence the training that is available locally so that they get what they need rather than what the training institutions choose to provide.
Employers are showing far more interest in anticipating needs. For example, in Dover the district council, the training and enterprise council, the chamber of commerce and other local groups are coming together to make it possible for the 2,000 or so international freight forwarders who will become redundant as a result of the
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1992 single market to discuss and work out the sort of training that they need. We have achieved an enormous amount. The Government are right to try to create the climate and to improve the information system. They have put forward a whole range of imaginative programmes.I conclude by making one plea to my hon. Friend the Minister. There is a mass of evidence, which I shall be happy to provide him with if he has not already seen it, that employers are completely lunatic about the age requirement that they attach to various jobs. For example, they expect secretaries to be under 30. They are extremely reluctant to employ older people. They frequently will not even give an older person an interview. They will put up all kinds of smokescreens, the commonest one being that older people are not a good investment because they do not stay long. All the evidence that I have seen suggests that older men and women stay longer in employment than their younger counterparts. They say that older men and women are too inflexible to learn. That is rubbish and it can be demonstrated again and again.
I know that my hon. Friend and our right hon. and learned Friend the Secretary of State believe that to some extent the market will take care of that. The market may do so up to a point but, as in many markets when there is an information gap, the Government need to take an initiative, along with employers' organisations and trade unions, to break down the walls of prejudice against the employment of the older worker. If we do not do that, how in heaven's name will older people be able to finance the 30, 40 or, in some cases, 50 years that they will have outside the labour market? That will become an enormous charge on our children and our grandchildren.
I commend the Government for a number of imaginative initiatives. I detect a major change in Britain in the climate towards employment training and I ask the Government to take a serious look at the obstacles against the employment of older people.
8.14 pm
Mr. James Wallace (Orkney and Shetland) : Once again, the House is indebted to the hon. Member for Newham, North-East (Mr. Leighton) and his Select Committee for producing a report which I am sure will give rise to some interesting debate. However, if I may be allowed to introduce a note of disappointment, the report is in some respects inconclusive. It has done the House a service in bringing together clearly the views of different bodies from which the Committee took evidence, but it is clear that it had some difficulties in coming to conclusions and making recommendations. That is no doubt because, as the hon. Gentleman said, this is an issue which gives rise to considerably heated debate and passions on both sides of the argument.
Few if any of those who gave evidence to the Committee, and, I think, few in the House, would dispute that unemployment is rising. The Government for some time took solace from or hid behind the figleaf of the fact that the rate of unemployment in the United Kingdom was much less than that of a number of our European competitors. But they can no longer deny that the rate of increase in unemployment in Britain is faster than most, if not all, of our European competitors.
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It is important that we regularly return to address this matter. When we hear the statistics and the monthly unemployment figures, we should not lose sight of the fact that we are dealing with people and families who are suffering the frustrations and, people often feel, the indignity of unemployment. In addition, there are those who have the threat of unemployment hanging over them, not knowing whether next week their job or the job of a member of their family will be on the line.The hon. Member for Newham, North-East spent some time dealing with the impact of the exchange rate mechanism on employment levels. He drew attention to the fact that there had been few if any studies of what the impact would be in the United Kingdom. It is important to remember that the current trend of increase in unemployment in Britain long pre-dates Britain's entry into the ERM. In April last year, the tables were turned and we no longer had reports of monthly decreases in unemployment but, sadly, monthly increases. That was some six months before our entry into the ERM.
If we are looking for the causes of the current rise in unemployment to unacceptable rates, we should look to the unsustainable boom that was created by the Government not only just before the previous election but after it. Had we joined the ERM much earlier, when my right hon. and hon. Friends were advocating entry, we would not have had the high interest rates that were ultimately necessary to contain the boom created by the Government, and the problems created by that boom would have been tackled earlier within the discipline of the ERM.
Mr. Janman : Does the hon. Gentleman agree that the main reason for interest rates being low during 1987-88 was the fact that my right hon. Friend the Member for Blaby (Mr. Lawson) was tracking the pound to the deutschmark because of his predilection, shared by the hon. Gentleman, to join the ERM sooner rather than later? It was, therefore, a desire to peg sterling to the deutschmark--a quasi-ERM environment--that caused interest rates to be reduced and the inflation which the hon. Gentleman has accepted in his analysis.
Mr. Wallace : I could not wholly accept that argument. An important reason for the high interest rates was that the Government, through a number of measures, not least those introduced in the 1988 Budget, brought about a huge expansion in credit which they simply could not sustain. Therefore, they had to have high interest rates to bring that under control. Had we joined the ERM much earlier, in the mid-1980s, I doubt whether we would have got into the position from which we are now trying to pick up the pieces.
What would happen if we were to leave the ERM and allow the pound to devalue? I have no doubt that initially there might well be a small boost to exports, although I fear that that would soon be eaten up by subsequent inflation. Ultimately, interest rates would go up rather than down, because the markets would have no faith in the Government's willingness to tackle inflation and maintain the value of the currency. Investors would require higher interest rates to reflect the increase in the perceived risk involved in holding sterling. I am not sure that I understood the implications of what was said by the hon. Member for Newham, North-East ; I believe, however,
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that if we came out of the exchange rate mechanism, economic policy would lose credibility and unemployment would continue to rise rather than fall.Politicians can no longer choose the soft option. Companies will have to face up to disciplines that will not allow the politicians to go on pretending that miracles can be worked through no more than a change in the currency. I doubt whether such pretences were effective in the past, over the long term ; they are even less likely to succeed now, when economies are so closely integrated on an international basis.
If Britain sticks by its ERM commitments--if, as the Prime Minister suggested in a recent answer to my right hon. Friend the Member for Yeovil (Mr. Ashdown), there is a move to enter the narrow currency band and to make the Bank of England independent--investors, companies and employees will know that the Government mean business. Once that is understood we shall be able to embark on a path of sustainable growth, with greater economic stability, and to generate circumstances in which unemployment can not only fall but, with any luck, remain at a lower level.
Not surprisingly, the Select Committee was unable to reach a conclusion on the subject of the statutory minimum wage. As its report states, the TUC advocated such a system, but conceded that it was not
" the perfect and only answer' to the problem of low pay". It is also not surprising that the Institute of Directors opposed the idea. My party, too, is on record as opposing it : we do not consider that it is the right way to tackle the problem of low pay. In trying to rubbish the arguments for a minimum wage, the Secretary of State for Employment has said that 2 million people would lose their jobs. As can be seen from recent newspaper analysis --not least in the columns of The Independent --his figure is based on a series of flawed hypotheses. By "hyping up" the true position, the right hon. and learned Gentleman has to some extent destroyed what should have been a serious debate.
The issue between the hon. Member for Fife, Central (Mr. McLeish) and me-- and, I assume, between the Opposition and the Government--is not whether people should be condemned to low wages ; we all accept that a high-wage, high-productivity economy brings benefits. The issue is the way in which that is to be achieved. My party strongly believes that the statutory minimum wage, by introducing a degree of "leap-frogging", could destroy jobs and, thus, lose the second or third income of a household, if not the first. Households could be pushed into poverty, while the objective is to free them from it. By all means let us strengthen the wages councils in areas of employment where there is not much international competition. Let us also, however, embark on a process of integrating the tax and benefit systems, to produce a national minimum income for households. That, surely, is a much better way of targeting the problem of poverty. I fear that, if the statutory minimum wage were introduced, thousands would lose their jobs ; and, tragically, unemployment is one of the main causes of domestic poverty.
The Select Committee agreed about the importance of skills and training. As has often been pointed out, 38 per cent. of the United Kingdom's industrial work force has received some skilled vocational training, compared with 67 per cent. in the La"nder that make up what was formerly West Germany. The figure is 79 per cent. in Italy, and 80
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per cent. in France. There is an obvious gulf between us and the countries that we shall shortly join in a single market, and with which we shall soon compete even more keenly.Over the years, successive Governments and employers have placed us at a competitive disadvantage by not taking training seriously enough. The hon. Member for Mid-Kent (Mr. Rowe) thinks that the climate may be changing, but I feel that the Government have their own role to play. Even after last month's announcement by the Secretary of State of further measures to promote training, including increased funding, the Government--as the Secretary of State did not deny on that occasion--are spending less on training than they were when unemployment stood at 2 million and was falling. Now it stands at 2.25 million, and is rising. That strikes me as unbelievably shortsighted.
Earlier today, my party published its proposals for tackling unemployment. Those proposals do not shrink from the need to provide additional funding for employment training--so that we can improve quality as well as increasing the number of places--and to ensure that those who find themselves unemployed are given an opportunity to retrain and to learn new skills. We also want to give women a chance to return to work and to make a worthwhile contribution.
We are talking about an investment in people--an investment to which the present Government have not been prepared to commit themselves wholeheartedly. The Minister says, "Tut, tut", but he knows full well that the Government's contribution is declining when it should be increasing. I know that he has a brief from which to argue, but surely, in his heart of hearts, he knows that at a time of rising unemployment the Government should be spending far more on training. Much, if not all, of the youth training system is now administered through training and local enterprise councils--TECs and LECs. May I give an example from my constituency? A young girl there, who was about to embark on a training course arranged through the Training Agency in Inverness, now finds that she cannot do so because the LEC that is now responsible claims that it cannot afford to pay. On further examination, I discovered that the previous arrangements for the Training Agency involved swings and roundabouts.
In my constituency, as the Minister will appreciate, the cost of board and lodging for a young person going away to train can be considerable ; the circumstances are different when the training takes place virtually on the person's doorstep. Given the geographical character of LECs, which operate in areas that are remote from the national training centres, they are bound to incur a heavy burden in funding board and lodging.
I hope that the Minister will appreciate the difficulties in these early days. When training is provided on a national and regional basis the costs can be equalised, but that will not always be possible with LECs. The Minister may not be able to give me an answer immediately, but I trust that he will look into the matter, because it may recur increasingly as the TECs and the LECs bed down. We should not merely bemoan unemployment. There seems little point in comparing the numbers who are unemployed in the various constituencies with the Conservative majorities there unless we are also prepared to say what we are going to do about the problem. My hon. Friends and I have tried to do something. I do not
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pretend that ours is the complete answer ; indeed, we believe that the recession is too deep for it to be possible to wave a magic wand overnight and achieve full employment. We believe, however, that the Government have a duty to make an effort.We have identified, for instance, the capital funds that are locked up in local authority bank accounts as a result of council house sales. We believe that those accounts could be unlocked to fund a housing programme involving not only new build but renovation. School buildings could also be improved. I am sure that many of us have been asked why a local school has a leaking roof when people are on the dole. The hon. Member for Newham, North-East cited the company bankruptcy figures ; they show that, in recent months, the construction industry above all has suffered, and needs a boost. We have also targeted energy efficiency. We believe that that is worthwhile because it leads to proper stewardship of resources. Also, if people improve the efficiency and insulation of their houses, there will be lower fuel bills which will particularly help those on lower incomes. That sort of work tends to be job intensive and more emphasis and resources should be devoted to an energy efficiency scheme.
We also believe that more should be done to try to stimulate small businesses. Nine out of 10 businesses going out of business employ fewer than 100 people. It is always the large redundancies that hit the headlines on "News at Ten", but the cumulative effect comes from small businesses which have to make people redundant as they go to the wall.
The 10.9 per cent. increase in the uniform business rate this year--the maximum by which the Government could have increased it--was a criminal blow to small businesses. The Chancellor did some things in his Budget to help small businesses, but those things have been swamped by the additional revenue that businesses up and down the country will have to pay in UBR. We propose more help with the administrative costs of setting up new ventures. We should try to devise ways in which to bridge the traditional gap that has been identified in this country between those with good ideas and those who convert them into further development and production. Assistance should be given through seedcorn enterprise initiatives. We want to help businesses that suffer from the late payment of debts. That would be done by a statutory right to charge interest on outstanding debt.
Some six weeks ago, the Chancellor said that rising unemployment was a price worth paying. I do not accept that and neither do the British people. There is a high cost of unemployment in terms of people's income, homes-- there is an increased number of
repossessions--and health and well-being. That is certainly not a price worth paying. The Government have to pay a crude price in terms of increased benefit. It is estimated that it costs £300 million for every 100,000 extra unemployed. There is a duty on the Government to try to do more than they have done up to now to reduce the impact of the recession. Mass unemployment is not inevitable. Other economies such as Japan, the United States, France and Germany have succeeded in having lower unemployment and lower inflation. The Government lack the political will to achieve a similar end.
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8.32 pmMr. Tim Janman (Thurrock) : The hon. Member for Orkney and Shetland (Mr. Wallace) said that Germany has had lower unemployment than Britain. For much of the past few years Germany has had higher unemployment than Britain and the new united Germany has considerably higher unemployent. Because of the existence of minimum wages in some parts of the German economy--there is not an across-the-board national minimum wage as the Labour party tries to suggest--there is a particularly acute problem with youth unemployment in Germany, which is far worse than in Britain. The hon. Member for Orkney and Shetland should do his homework before making gauche statements about German employment.
We are debating future levels of employment and unemployment. I do not wish to discuss in great detail what was said in the Select Committee because many of those in the Chamber are members of the Select Committee and it would be somewhat incestuous to go over what we have already debated. If we are to make assessments about the future level of employment and unemployment, we must look at the factors that will affect the statistics. We have to ask who will be in government, what will be their monetary policy and will we stay in the exchange rate mechanism ?
The hon. Member for Newham, North-East (Mr. Leighton) and I are such good companions on the Select Committee that I nearly called him my hon. Friend. The fact that he would not give way to me earlier was a break in a great custom. I think that the hon. Member for Newham, North-East was exaggerating slightly when he talked about ERM membership in that--he said as much later in his speech--to all intents and purposes the die is cast for unemployment trends in the next 12 months. Membership of the ERM may mean that unemployment is slightly higher than it would otherwise have been because the Government lose a degree of economic and political freedom in how they manage the squeezing of inflation out of the system.
The hon. Member for Orkney and Shetland did not really contradict my intervention during his speech because the credit boom that he mentioned was due to the low interest rates, which were in turn due to the desire of the then Chancellor to peg the pound to the deutschmark. He had to lower interest rates to keep the 3 :1 ratio. He wanted to take us into the ERM sooner rather than later. I agree with the hon. Member for Newham, North- East that membership of the ERM will probably mean that for the time between entry and the next year or so unemployment will be higher than it would otherwise have been. However, I do not think that it will be much higher. It is a matter of degree and I do not think that it will make any fundamental difference to the general trend that we shall see. The important issue is what sort of Government we will have in the future, what monetary policy they will pursue, what the consequent level of inflation will be, and how much intervention and renationalisation of industries will occur. Will we have a Government, such as that we have now, who are making the right decisions about the fundamental structural issues in the economy and who have implemented the correct policies and philosophies over the past 10 years, or will we have a Government who go back to the bad old habits of saying that politicians and
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bureaucrats know best and know more about how to run businesses than business men or more about running industry than industrialists? We would inevitably return to that scenario if there were a Labour Government after the next election. We would then see the distortion of resource allocation in the economy that we saw in the 1960s and 1970s. At that time one man's job may have been lost in order to keep somebody else in a job which, in any real economy, would have disappeared because of technological change or because such over-manning would not be allowed.What will happen in the future about the attitudes and activities of trade unions? To some extent, that will depend upon the Government. Will we return to the good old corporatist days of the 1960s and 1970s? I am not making a purely party political point because, even when my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) was running the country, we had the corporatist beer and sandwiches at No. 10 just as we did under a Labour Government. We do not want to return to that, but I fear that under a Labour Government we would.
As I have said, the crucial questions involve who will be in power, what will be their monetary policy, whether they will be determined to get inflation down and keep it down and whether they will be prepared to discipline themselves not to intervene in the economy to distort where resources go. It all boils down to whether we will have stability.
The speech of the hon. Member for Newham, North-East was one of unmitigated gloom. At least the speech of the hon. Member for Orkney and Shetland contained one optimistic phrase. I think that he understands the need to achieve, in the near future, the important objective of stability. I believe that we are well on the way to achieving that with a halving of inflation during the past six months. Then, with the discipline of the ERM or the self-imposed discipline from the Bank of England and Treasury, if we keep our monetary policy tight and ensure that people pay themselves only in line with what is being produced and keep unit labour costs competitive with Germany, the United States, Japan and our other main competitors, we will see a golden decade for Britain in manufacturing and service industries. That is how we shall return to rising employment and growth.
Before returning to those fundamentals, a word about unemployment in my constituency. In July 1986, unemployment in the Thurrock constituency was 5,723. In June 1987, it had fallen to 4,965. In May this year, it had fallen to 3,879--21.9 per cent less than in June 1987. That is the biggest fall since June 1987 in any Essex constituency, and the 17th biggest fall among the 182 constituencies in London and the south-east. I do not pretend that things are not difficult and I hope that my hon. Friend the Minister will recognise that that is so, but I want him to know that business in my constituency is bearing up well.
There are several reasons for that. Two or three years ago, the then Secretary of State for Employment, my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler), took the imaginative and courageous step of abolishing the dock labour scheme. Would a future Labour Government return to the bad old days of the dock labour scheme? My Labour opponent is always going on about bringing back the scheme, but I have not noticed the same enthusiasm among Labour's employment spokesmen. Perhaps he was trying to persuade my constituents to vote for him by making false promises.
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