HC Deb 06 April 1989 vol 150 cc320-2
2. Mr. Colin Shepherd

To ask the Chancellor of the Exchequer what is his latest information on the investment intentions of British manufacturing industry.

12. Mr. Irvine

To ask the Chancellor of the Exchequer what is his latest information on the investment intentions of British manufacturing industry.

The Chancellor of the Exchequer (Mr. Nigel Lawson)

The Financial Statement and Budget Report forecast is for business investment to rise by 8 per cent. in 1989.

Mr. Shepherd

I thank my right hon. Friend for that response. Does he agree that it shows that under the Government manufacturing investment is growing satisfactorily? Will he confirm that in terms of GDP, total manufacturing investment is now higher than it was at any time during the last Labour Administration? Can he say whether this growth is fully nationwide?

Mr. Lawson

Yes, my hon. Friend is right. The investment boom that has been continuing now in this country for several years and is scheduled to continue in this current year is nationwide. It is perfectly true that total investment is a higher proportion of GDP than in any year under the last Labour Government and indeed business investment last year—1988—was the highest proportion of GDP since records began. As for manufacturing investment, the latest Department of Trade and Industry investment intention survey suggested that manufacturing investment will rise by 11 per cent. in 1989—far and away the highest figure ever.

Mr. Irvine

Does my right hon. Friend agree that this continuing high level of investment is the best possible indication of confidence by industry and commerce in the Government's financial policy and in the fundamental strength of the British economy?

Mr. Lawson

My hon. Friend is right. It has long been the case in this country that our two main problems—they have been identified in the past by many outside commentators—were a poor rate of growth of investment and a poor rate of growth of productivity. Now we have the highest rate of growth of investment in the 1980s of any major country in Europe. Indeed, over the past seven years total investment has grown more than twice as fast as consumption and we also have, of course, throughout the 1980s an unprecedented growth in productivity and so the fundamentals of the British economy are improving in the way that we always desired, but never before achieved.

Mrs. Mahon

If the Chancellor believes that the economy is improving so much, why were 20,000 jobs lost in the textile, clothing and hosiery industry last year? Will he give us his forecast for the future of textiles over the next 12 months?

Mr. Lawson

Of course I am well aware of the difficulties of the textile and hosiery industry, not least because I represent an east midlands constituency. But of course there are some industries that shed jobs and there are others that put them on. What we have seen is overall—taking the economy as a whole—unemployment falling further and faster than in any other country, and than in any other period. Indeed we now have a level of unemployment in this country well below the European Community average.

Mr. Grocott

Can the Chancellor of the Exchequer confirm that, according to the Government's press release of 15 March, manufacturing investment in 1988 was £10,990 million while manufacturing investment in 1979—nearly 10 long years ago—was £11,137 million? Is that not a pathetic record?

Mr. Lawson

I do not think that it is a pathetic record. As I pointed out, total business investment is at a higher proportion of GDP than it has ever been since records were first collected. What was happening in manufacturing industry under the Labour Government was that there was so much—[Interruption.] I am answering the hon. Member's question. He asked me a question and I am now answering it. What was happening then was that as a result of restrictive practices, inefficiency and, in many cases, poor management the return on the capital then was very very poor. It was necessary to increase investment substantially in manufacturing, it was necessary to get more output—which is what we have got—more output and better and more efficient use of existing capital. Now the forecast is for manufacturing investment to rise, as it is set to do in the current year, to a record level and the quality of investment is far higher as is shown by the return on manufacturing investment. So the hon. Member does not know the first thing that he is talking about.

Mr. Quentin Davies

Does my right hon. Friend agree that the continuing buoyancy of investment in this country is one of the most favourable and promising factors for the prospects of non-inflationary growth? It is vital that nothing should be done to damage that investment confidence. Does my right hon. Friend also agree that his very cautious Budget did a great deal to reassure industry and shore up that very important confidence?

Mr. Lawson

I am grateful to my hon. Friend for his remarks about the Budget and of course he is quite right to emphasise the importance of confidence. Confidence in this country is very high and this is shown, of course, most recently by the CBI survey of investment intentions. It really is deplorable, the way in which the Labour party can do nothing but try to run Britain down and to deny the facts of investment success and of investment boom that are all around us.