§ As I said earlier, the past year has seen great economic progress. Production has risen by about 5 per cent. overall and by about 8 per cent. in manufacturing industry. The expansion has been broadly based, extending from consumer goods to steel where the latest figures show an increase of 20 per cent. over a year ago. Production, investment and exports are all now reaching record levels.
§ The number of people wholly unemployed has fallen since last April from 570,000 to 415,000, that is by more than 150,000; and, as an even more significant indication of the way things are moving, notified vacancies for adults have riser from 138,000 to 202,000 in the same period. Prices remained relatively stable with the retail price index rising by less than 2 per cent. in a year when import prices rose by 5 per cent. or more and prices in the European Economic Community rose by about 6 per cent.
§ Exports rose during 1963 by 10 per cent. and imports by 13 per cent. by value. In 1963, we had a current account surplus of £120 million, but by the early months of this year we had begun to show some deficit. In so far as this arises from increased imports, it is neither surprising nor undesirable. I have, indeed, foreshadowed on many occasions that this would happen. It is the inevitable result of economic expansion, particularly of stockbuilding, and it is reasonable to remember that imports of raw material and semi-manufactures precede the production on which future exports will be based.
§ In my Budget statement last year, I outlined the measures we were taking to strengthen the economy and to provide, so far as it is in the power of Government to do so, the basis for a long-term growth rate of 4 per cent. I emphasised, first, the need on both human and economic grounds for making a more even use of our manpower resources, and I announced two very important new measures to encourage still further the economic development of the less prosperous parts of the country.
§ First, new standard grants under the Local Employment Act for buildings 255 and plant and machinery. Secondly—and this was an entirely new departure—the system of free depreciation. These measures have existed for the best part of a year and the Government have been making every effort to bring home to industry the very large financial benefits which they can confer. It is still too early to assess their full effect; indeed, this is only now beginning to emerge. But the facts are immensely encouraging.
§ Applications at 2,660 for all forms of assistance under the Local Employment Act over the past year were seven times as many as in 1962–63. Most of them were for the new standard grants and two-thirds of these were for Central Scotland and North-East England. A strong flow of applications for these grants has existed throughout the year at an average rate of 40 to 50 a week and recently this rate has risen markedly.
§ In 1963–64, 435 projects were approved for assistance estimated to provide nearly 37,000 additional jobs. Of these, 16,000 were in Central Scotland and over 12,000 in North-East England. Moreover, as I have said, the flow of applications for standard grants still continues and a large number of them now under consideration will bring further work to these areas.
§ Over the last 12 months we have also gone ahead with the measures I then outlined for training workers in new skills. We now have the Industrial Training Act and my right hon. Friend the Minister of Labour is about to set up the new Central Training Council and Training Boards for the first four industries, including engineering and construction, which cover about half of the industrial apprentices in the country. We are pushing on with the planned expansion in Government training centres and we expect the programme, which provides for 18 new centres, to be substantially complete by the end of the year.
§ The strengthening of our industrial base has continued in both the public and private sectors. We indicated in last November's White Paper on Public Investment that targets of financial performance had been agreed for all the major nationalised industries in the fuel field, and also for the Post Office, British European Airways and London Transport.256
§ This provision of a firm framework of financial obligations has proved its worth for the efficient management of these public bodies. In particular, it sharpens their attitude to costs and reduces the danger of misdirection of capital resources which is inevitably present in operations of this scale. In the fuel industry I would point in particular to gas, where new production techniques are being developed which will cut costs substantially, and sales are booming.
§ So far as coal is concerned, major technical developments have aided the industry in its uphill struggle to offset, by rising productivity, the inevitable tendency of costs to increase, and thus to keep the Coal Board in surplus.
§ On the railways, Dr. Beeching's courageous policies are producing results. As I said just now, the sum needed to finance the British Railways deficit this year is £29 million less than the provision made last year which has, incidentally, been underspent by £18 million. These are important gains for the Exchequer and the taxpayer just as the modernisation of the railway system is an immense gain to the strength of the whole economy.
§ The Chairman
Order. The hon. Member for Leek (Mr. Harold Davies) knows that if the right hon. Gentleman who is addressing the Committee does not give way the hon. Member may not remain on his feet.
§ Mr. Maudling
I am sorry not to give way, but I am trying to develop a consecutive argument and we will have plenty of time to study this point.
Turning to the private sector, in the construction industries, which are a key sector of the economy, output has risen fairly steadily since building controls ended in 1954, both because the labour force has increased and because output per head has improved. These industries are likely to be heavily loaded again this year and may have difficulty in meeting all demands. To deal with the increase in demand, productivity will have to be increased, since in conditions of full employment there is no prospect of large additions to the labour force.
The Government are co-operating with the construction industries in the development of measures designed to 257 achieve this rise in output, particularly in such important fields as the introduction of new methods of construction, standardisation of components, training and research and development. I am sure that the National Building Agency, established by my right hon. Friend the Minister of Public Building and Works, will contribute significantly to securing the increased productivity which we need.
There are now signs of a substantial increase in the level of investment in manufacturing industry. The Committee will recall the very great improvements made last year in the system of capital allowances. I doubt whether, even now, the advantages available for new investment are fully appreciated. Quite apart from special concessions for firms operating in development districts, the general benefits are very striking. For example, a company investing in a computer gets 60 per cent. of the cost allowed against profits in the first year and over 100 per cent. in the first five. At the end of the day a company will have received tax relief of very nearly 70 per cent. of the total cost of that computer, or nearly £175,000 in tax relief on art outlay of £250,000.
Much emphasis is now placed, and rightly placed, on the importance of encouraging investment in advanced and often, therefore, expensive modern machinery and equipment. The figures I have just quoted show how effectively we have already provided such encouragement. I know of no country in the world that gives so great a tax incentive to the installation of modern equipment, and I believe that if it should be true that businessmen are, in any cases, still reluctant to buy the most modern machinery we must look beyond the tax system for the reasons.
Greater enterprise now brings greater rewards. No longer can it be said that the weight of taxation on industry here is greater than that on our industrial rivals. If our industry is to thrive it is right that enterprise and efficiency should be rewarded by higher profits. But the other side of the coin is to ensure that inefficiency and lack of enterprise suffer the appropriate penalty. Here the most effective means is the stimulation of competition. The measures recently announced and introduced by my right 258 hon. Friend the Secretary of State for Industry and Trade, designed to sweep away barriers to competition throughout the economy, are a vital and central part of the total picture.