HC Deb 07 July 1980 vol 988 cc2-4
2. Mr. Adley

asked the Secretary of State for Industry what further steps he intends to take to stimulate investment in industry.

The Secretary of State for Industry (Sir Keith Joseph)

The Government are pursuing the slow, difficult policies necessary to abate inflation, and reduce the level of interest rates and the degree of crowding out of private industry. I am trying to persuade the trade unions, which urge more investment, that they could transform the prospects for investment and jobs as inflation abates if they would throw their influence into offering employers higher productivity and a rise in the catastrophically low level of real profits on average in manufacturing industry by reducing restrictive labour practices and overmanning.

Mr. Adley

Is the Secretary of State aware that he will be thwarted, rather than assisted in his efforts, by activities of companies such as the Reed Group, which in my constituency is closing the Shand Kydd factory in Christchurch, and is refusing to negotiate with a group that is willing and able to take part of that factory in order to maintain some of the employment? Is he further aware that the unions are deliberately pushing up wage claims at national level that are creating further insolvency in the company? Will not my right hon. Friend deplore this sort of attitude, which is surely contrary to the Government's intention of encouraging small businesses?

Sir K. Joseph

There are parts of my hon. Friend's supplementary question with which I agree in general, but I cannot pronounce on an issue which is not known to me.

Mr. Foster

Does not the Secretary of State agree that the private sector is not investing because the real rate of return is too low? If we are ever to get out of this vicious circle of low productivity and low investment will not central Government need to create a fund to channel North Sea oil revenues into manufacturing industry, particularly into areas of high unemployment, such as the North-East?

Sir K. Joseph

I agree with the hon. Gentleman that low productivity, high in- flation and low profits are a poor background for greater investment. However, it would not be sensible to try to channel North Sea oil money into investment decisions via the Government, as opposed to via the consumer.

Mr. Bruce-Gardyne

Will my right hon. Friend agree that over the years the record of State investment in selecting the commercial winners of the future, from Concorde downwards, compares somewhat unfavourably with that of a drunken punter with a bent pin?

Sir. K. Joseph

I will even give my hon. Friend a puff by saying that his book on the subject, coupled with the words of my hon. Friend the Financial Secretary, should be required reading.

Mr. John Silkin

Is not a greater deterrent to investment by private sources in this country the Government's own policy in three distinct ways: first, an overvalued pound, second, the highest interest rates in the history of our country and, thirdly, the abolition of exchange controls, all of which together have made it much more profitable for private investment to go abroad or into areas other than manufacturing industry?

Sir K. Joseph

No, I think that the right hon. Gentleman is wrong on all three counts. The pound reflects the demand for and supply of the currency and is not overvalued in the market in that sense. Interest rates at their supply and demand level are a necessary part of reducing inflation. As for the abolition of exchange controls, contrary to the mythology that is widely believed by some people, including the Opposition and many trade unions, there is to some degree a choice between money and jobs going abroad.

Mr. Silkin

Is the Secretary of State aware that we disagree with him entirely in his analysis? Is he also aware that he has not answered the question? Is not a greater reason for the present lack of private investment those three aspects of Government policy?

Sir K. Joseph

The answer is "No", because an attempt to manipulate downwards the exchange rate or interest rates would accelerate inflation, which is the biggest danger of all to investment.