HC Deb 27 March 1985 vol 76 cc467-8
9. Mr. Kenneth Carlisle

asked the secretary of State for Trade and Industry what increases have occurred in input costs for manufacturing industry over the past 12 months; and to what extent these have been offset by improvements in productivity.

Mr. Pattie

Comparing 1984 with 1983, material and fuel costs of manufacturing industry rose by 8 per cent., while wage and salary costs increased by 8.75 per cent. The strong productivity performance, up 4.5 per cent., allowed the increase in unit labour costs and manufacturers output prices to be limited to 4 per cent. and 6 per cent. respectively.

Mr. Carlisle

I welcome the increase in productivity. Does my hon. Friend agree that as a trading nation we must compete with the performance of other countries, and that the creation of jobs depends on that? Does he further agree that in that respect it is essential that our unit costs rise less than those of other countries? How has our performance been in that respect?

Mr. Pattie

My hon. Friend is absolutely right in drawing attention to this problem. Unit labour costs continue to rise too fast compared with those of our competitors. On the latest figures available, unit labour costs in manufacturing fell during the past year by 5 per cent. in Japan, and 2 per cent. in Germany. They remained static in France and rose by 1 per cent. in the United States.

Mr. Ashdown

Is it not the case that total factory production has fallen by 8.7 per cent. since the Government came to power? Will the Minister tell us when he expects the total ex-factory production in the United Kingdom to reach the point that his Government inherited in 1979?

Mr. Pattie

The hon. Gentleman's statistics are incorrect. Productivity has increased considerably in the last two quarters. We see no reason why it should not continue to do so.

Mr. Hickmet

My hon. Friend will be aware of the effect that the increase in raw material costs priced in dollars has had on the British Steel Corporation. Has his hon. Friend who attended the Steel Council meeting yesterday informed him of what success he had in increasing BSC's steel quota, the United Kingdom's steel quota or United Kingdom steel prices? What is the prospect of offsetting those increased costs?

Mr. Pattie

My hon. Friend will agree that that matter does not arise out of this question, but I am sure that he will find ways of drawing his point to the attention of my hon. Friend.

Mr. Campbell-Savours

To what extent are high interest rates impeding industrial expansion?

Mr. Pattie

Obviously, to some extent. We estimate that higher interest rates have added about £230 million for each 1 per cent. rise in interest rates, but we should not consider that in isolation. Many firms will benefit from the lower value of sterling. It is interesting to note that the 4.5 per cent. increase in base rates in January is equivalent to about 1.25 per cent. of companies' pay bills. Therefore, to return to the original question, a modest slowdown in the growth of earnings would offset the damaging effect, if any, of the increase in interest rates.