Industrial Competitiveness (Hansard, 29 November 1982)

§ 11. Mr. Ioan Evans
asked the Secretary of State for Industry to what extent the competitiveness of British industry has changed since May 1979.

§ Mr. Patrick Jenkin
According to IMF figures, United Kingdom manufacturing industry's unit labour costs were 23 per cent. higher relative to our competitors in the second quarter of this year compared with the second quarter of 1979. However, this figure is misleading, because it conceals the important fact that there has been a 15 per cent. improvement in competitiveness in the last two years. This progress must be sustained.

§ Mr. Evans
Is it not true that we are more than 30 per cent. less competitive than when the Government were elected? As this issue has been the main thrust of Government policy, does it not show that Government policy has been an abject failure?

§ Mr. Jenkin
The hon. Gentleman will remember that it was the pay explosion in 1978–79 that wrought havoc with industry's competitiveness and that it took time to get that under control. Since 1980, rising productivity and much lower inflation have begun to restore our competitiveness. We must not throw it away by profligate public spending and soaring inflation, which would be the result of his party's policies.

§ Mr. Kenneth Carlisle
Is my right hon. Friend aware that many firms in engineering have increased their ability to compete by getting rid of restrictive practices and accepting realistic wage settlements? Is he further aware that that will result in better sales when the world recession is over?

§ Mr. Jenkin
My hon. Friend is quite right. During the past two or three years that industry has shown how much can be done to improve productivity by getting rid of outdated restrictive practices, introducing new methods, getting rid of overmanning and bringing in new products which are better designed and more up-to-date. That is what we should encourage. We have shown that we can do it. Let us not throw it all away now.

§ Mr. Orme
As the exchange rate plays such a large part in the competitiveness of British industry, will the Government now come clean on their policy for the exchange rate? We have heard contradictory statements from the Prime Minister and the Chancellor of the Exchequer. The Government have created panic in this area. Will they now make a statement?

§ Mr. Jenkin
It is nothing like the panic that would be created if the right hon. Gentleman's policy ever came into being. This is a serious matter. If a small misunderstanding by markets during the past few weeks has led to the fall in the pound that it has, what would happen if Labour 12 policy were ever put into practice? I repeat the Government's position, so as to make it absolutely clear. There is no exchange rate target. It should be beyond doubt in the markets that the Government have no ambition to depreciate sterling, whether by 3 per cent., 7 per cent. or 10 per cent., and certainly not by the Labour Party's 30 per cent.

§ Dr. Mawhinney
Does my right hon. Friend agree that one of the elements in competitiveness is an adequate supply of skilled manpower? Is he satisfied that when the recession ends this country will have a sufficient supply of skilled manpower to meet competitive targets?

§ Mr. Jenkin
I must tell my hon. Friend that I am not so satisfied. In my opinion there is a real danger of shortages of skilled manpower, particularly in the newer expanding industries. That is why my right hon. Friend the Secretary of State for Employment, with the Manpower Services Commission, has embarked on a major programme to increase people's skills and training. I believe that my Department has a role to play. We must become more of a people-oriented Department, and perhaps spend less on things.

§ Mr. Straw
Has the Secretary of State seen the survey of business men in The Times today, in which they seek to get the exchange rate down to $1.50, which would amount to a 15 per cent. devaluation in the dollar rate during this year—exactly what the Labour Party has called for? If the Government do not have an exchange rate target, why have they intervened in the market to force up interest rates and industry's costs, so as to maintain the pound at a higher rate than is necessary?

§ Mr. Jenkin
The hon. Gentleman should read The Times more carefully. The actual results showed that while 17 per cent. wanted sterling to be devalued to $1.50, 63 per cent. agreed with the Government's policy of allowing the pound to find its own level.