Investment (Hansard, 13 December 1976)

§ 5. Mr. MacGregor
asked the Secretary of State for Industry whether he is satisfied with the projected levels of investment in industry over the next few months.

§ The Under-Secretary of State for Industry (Mr. Bob Cryer)
No, but investment has now begun to pick up and we shall do all we can to strengthen industrial confidence.

§ Mr. MacGregor
Does not the Minister agree that, in the present mood of extreme caution by industry about the growth prospects for its markets, when very high interest rates are having a bigger impact than high interest rates normally have, and in view of the new burdens such as the national insurance surcharge, there will not be growth and investment in industry? Does he agree that this will persist until interest rates come down, until there is no further interference in industry and until the levels of profitability increase and remain at that higher level?

§ Mr. Cryer
Hon. Members must now be clear about the reasons for high interest rates. They must be aware that we hope to bring them down as soon as possible. Gross fixed investment for the third quarter of 1976 was 2 per cent. up on the previous quarter, and although that is not high enough it is an improvement. We hope that 1977 will show an increase in that improving trend. The Department of Industry's survey of industrial intentions published in October indicated that in 1977 there should be an increase of between 15 and 20 per cent. The CBI's survey published on 2nd November indicated a rise of 10 to 15 per cent. The Government are doing everything in their power to set the standard and create the environment for investment intentions to be carried into effect.

§ Mr. Norman Lamont
Is not one of the causes of high interest rates the amount of money that the Government are having to borrow? Will the hon. Gentleman make it clear to the Chancellor of the Exchequer that the needs of industry demand that there should be not a marginal or distant but an immediate and significant reduction in Government spending?

§ Mr. Cryer
The reasons for high interest rates are multifarious. I do not want to tread on the ground of my right hon. Friend the Chancellor. Perhaps I may say, however, that one of the most damaging factors could be the chopping and changing in public expenditure with the erosion of confidence in the facilities and social services which are available to the working people. The working people, as well as management, have a part to play, and I hope that in view of the sacrifices by trade unionists under the social contract the people who make investment decisions will bear these factors in mind and will make the correct decisions in 1977.

§ Mr. Viggers
The hon. Gentleman has not answered the question. How can industry expect to compete if it has to borrow money at 15 per cent. when German industry is borrowing at 6 per cent.?

§ Mr. Cryer
We understand the gravity of the situation. However, the hon. Member would be better to direct that question to my right hon. Friend the Chancellor. We realise that these are general difficulties. We hope that interest rates will be brought down as soon as possible. However, the Department of Industry and the Government in general are attempting to create a general environment in which investment decisions can be made with confidence.