HC Deb 18 June 1986 vol 99 cc1033-5
8. Mr. Kennedy

asked the Secretary of State for Trade and Industry what is his most recent assessment of the impact of lower oil prices on the manufacturing and exporting base of the United Kingdom economy; and if he will make a statement.

Mr. Peter Morrison

Lower oil prices will benefit United Kingdom manufacturing and non-oil exports. They will provide the non-oil sector with a great opportunity to build on the substantial gains of the past five years and to expand output further.

Mr. Kennedy

I thank the Minister for that reply. However, does he agree that his Department must remain concerned about the effect that that will have specifically on the oil sector and the oil-related sector? Will he give his Department's view of the fact that the Chancellor based his entire Budget strategy on an average oil price levelling out this year at about $15 a barrel, but that the Scottish Development Agency has carried out a computer projection which has shown that if even that price is attained and persists it will lead to a 40 per cent. cut in spending by oil companies, with all the attendant catastrophic effects which that will have on the Scottish economy? What action does he propose to take?

Mr. Morrison

The hon. Gentleman asked a direct question as to whether I still agree with the analysis in the Chancellor's Budget statement in terms of manufacturing output being at around a 3 per cent. increase this year. The answer is yes. I would expect the two to match each other. Therefore, I think that the Scottish economy can gain. The hon. Gentleman makes the point. For the oil sector there will be a compensation the other way round.

Mr. Charles Wardle

Does my hon. Friend agree that the competitive advantage of lower fuel oil costs will quickly be squandered if pay claims in manufacturing industry continue to be settled at levels above the rate of inflation?

Mr. Morrison

I agree with my hon. Friend. Ultimately, the increase in better productivity—and to be fair we have had much better productivity during the past five years—is the key to an expanding manufacturing sector and the ability to gain or regain markets.

Mr. Williams

Does the Minister agree that it will be tragic for this country if, when the long-awaited upturn in world trade at last takes place as a result of the collapse in oil prices, we see yet another aspect of the Government's wanton destruction of manufacturing industry in their complete failure to invest oil revenue, so that we lack the breadth of industrial base to take advantage of the upturn? Do the Government not feel at all guilty over the fact that in the event of an upturn we shall be mere spectators and the new wealth and the new jobs will go to our competitors?

Mr. Morrison

The right hon. Gentleman is being his usual pessimistic self. He will recall that a Select Committee report in another place predicted gloom and doom in the event of a substantial drop in the price of oil, but no one could have anticipated that that drop would take place in such a short period. Nevertheless, the outlook for the manufacturing sector remains extremely good.

Mr. Kenneth Carlisle

Does my hon. Friend agree that our main competitors will also benefit from lower costs so it will not he so easy for us? Heavy engineering uses a great deal of energy. Will he impress on the Secretary of State for Energy that it is crucial that energy costs to industry in this country should fall by at least as much as for our competitors in other countries?

Mr. Morrison

I agree with my hon. Friend that we live in an international market-place so we must ensure that our productivity gains are as good as, if not better than, those of our international competitors. I also agree that the cost of energy, especially for heavy users, is a key element in that productivity.

Mr. Wilson

Given the previous concentration of the oil industry in Scotland, is it not simplistic for the Minister to assume that any of the benefits of lower oil prices will extend to the Scottish economy in view of the spending cuts that have taken place? Will he consult the Scottish Development Agency for an assessment, and if it is shown that Scotland will suffer particularly adversely as a result of the fall in oil prices will the Government restore the cuts in regional aid that they made two years ago?

Mr. Morrison

I assure the hon. Gentleman that, with my responsibilities for regional policy, I keep closely alongside the Scottish Development Agency. He should he aware that at present the agency is looked upon eagerly and with some envy for its great success and ability to attract new industries to Scotland, and I congratulate it on that.