HC Deb 13 July 1988 vol 137 cc354-5
14. Mr. Sean Hughes

To ask the Chancellor of the Duchy of Lancaster how he measures changes in the competitiveness of British industry in the last year; and what comparative information he has for West Germany.

Mr. Butcher

A variety of factors affect the competitiveness of British industry. Price and non-price factors are both important and there is no single measure of competitiveness.

Mr. Hughes

Does the Minister accept that we are now at least 10 per cent., and probably 15 per cent., less competitive than the West Germans than we were at the beginning of last year? When will Government policy on exchange rates and interest rates do something to help rather than hinder British industry?

Mr. Butcher

As has been said, an appreciating currency has been a trend that German manufacturers have coped with brilliantly over the past two and a half decades. They have concentrated on non-price as well as price factors, and we should do the same. They have concentrated on things such as quality, design, marketing and so on. The hon. Gentleman is entirely wrong. If we take an independent measure from the IMF, which incorporates movements in exchange rates, productivity and labour costs, we find that on an index of 100 the United Kingdom, compared to West Germany, was at 112 in 1981, 93 in 1984, moving down to 79.6 in 1986 and 72.2 in 1987. Our productivity is improving in great measure.

Mr. Dykes

Jaguar's motor car production is about 49,000 cars. Is my hon. Friend aware that, in Germany, BMW alone produces 490,000 vehicles? Is not one of the ominous realities that, despite the welcome recovery, we remain a low-output economy in leading manufacturing sectors? As my hon. Friend has attested, the Germans have managed with a high-currency policy to build up their industry and output, mainly through massive investment in new assets and innovation in high technology. When is my hon. Friend confident that we shall be able to do the same? Will he join me in setting a target of overtaking Germany, and how many years does he think that that will take?

Mr. Butcher

I ask my hon. Friend to study the policies that were the foundations for the German economic miracle. He should look at the three principles of those policies, which were put together by Euchen and Erhardt, and he will find strong parallels with British domestic policies today.

Mr. Cousins

Is the Minister's complacency not shaken by the fact that industrial production in engineering has fallen by 2 per cent. in the first three months of this year? Does he not realise that it will take us 25 years to catch up with Japan in the number of industrial robots that we have? Is he not aware that in advanced technology industries we fall further and further behind, as was instanced by the closure of Marconi Radar in Gateshead a day ago?

Mr. Butcher

No, I do not accept that for a moment. At long last British industry is showing a real return on capital. There are very healthy trends in investment programmes in crucial sectors. We are hauling in on the lead of some of our major international competitors. To catch up with Germany, we would need to grow at a faster rate than Germany well into the 1990s. I consider that to be a legitimate objective. If we continue with current policies, what has been mooted as a British economic miracle can happen.

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