HC Deb 27 November 1991 vol 199 cc893-5
1. Mr. Alan Williams

To ask the Secretary of State for Trade and Industry what plans he has to combat short-termism among investors in British industry.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Lilley)

The most effective way of avoiding short-termism is to defeat inflation, a task which this Government are well on the way to achieving.

Mr. Williams

Does the Minister recall that, after collapsing by 30 per cent. at the start of the last decade, manufacturing investment took the rest of the decade to return to its starting point? Now it has collapsed by 20 per cent. again. Will he explain to industralists why they should risk their long-term capital on economic forecasts from Ministers who cannot get them right even three months ahead?

Mr. Lilley

The right hon. Gentleman forgets that manufacturing output fell under the last Labour Government and has risen under this Government. Figures in the CBI report show that manufacturing output in the past decade, at precisely the same point in the economic cycle, is up by a quarter, investment is up by a third, productivity is up by a half and manufactured exports are up by nearly three quarters.

Mr. Norris

Does my right hon. Friend agree that the key to short-termism can often be found in the contracts which senior executives and directors write for themselves, concentrating on achieving short-term profit objectives to sustain a share price? Does he agree that there is an important role in publicly quoted company board rooms for non-executive directors to ensure that companies' long-term interests are reflected in management agreements with senior executives?

Mr. Lilley

My hon. Friend makes an important point. Shareholders should certainly take that factor into account when considering the performance of managers. In the long run, most shareholders, which are institutions investing on our behalf, must take a long-term view because they invest for our pensions and life assurance policies over the long term. Their interest, therefore, relies on long-term investments for long-term success, just as industry does.

Mr. Gordon Brown

Will the Minister confirm that in the Prime Minister's first year, far from escaping from short-termism, 45,000 businesses have gone under, 70,000 homes have been repossessed, 700,000 more people have lost their jobs and manufacturing investment has fallen by £2 billion this year and, according to the CBI, will fall by another £400 million even in 1992? Is not the ultimate in short-termism the Government's failure to listen to the widespread demand from industry for a long-term industrial policy for Britain? As the Prime Minister has done nothing to change that policy in his first year, is not Majorism simply Thatcherism without the courage of her convictions?

Mr. Lilley

The hon. Gentleman illustrates perfectly the short-termism of the Labour Front Bench. His question was based on a 12-month view.

Mr. Charles Wardle

Why should businesses want the Government to dictate industrial policy? Why should short-termism be a feature of investment which the Government can influence? Surely it is up to boards of directors, executives and investment managers to decide whether they wish to invest in the short or long term. Is not the Government's only contribution to provide a stable economy with low inflation?

Mr. Lilley

My hon. Friend is absolutely right. It is the responsibility and duty of investors and businesses to take a long-term view and they increasingly do so. It is the Government's job to provide a stable framework and reduce inflation. The Labour party's policies would re-ignite inflation and exacerbate short-term pressures.

Mr. Salmond

Would the Secretary of State consider short-termism among investors as a suitable excuse for the rocky position of sterling on the foreign exchange markets? Does he accept that the position of sterling is a verdict on industrial performance and, if so, is the verdict guilty or not guilty?

Mr. Lilley

That is another example of someone criticising short-termism by taking the shortest possible short-term view. Does the hon. Gentleman believe that when he has created an independent Scottish state it will have a separate currency, or would he go for the ecu?

Mr. Donald Thompson

Will my right hon. Friend take no lectures from the Labour party on short-termism, as its short-term policies will last only as long as the election and change for every by-election—

Mr. Speaker

Order. Is this about export credit guarantees?

Mr. Thompson

—especially in this field?

Mr. Lilley

My hon. Friend is absolutely right. One of the great problems that industry would face under a Labour Government would be knowing how long their policies would last before being reversed, not least on Europe. The Labour party seems to reverse its policies on that issue twice every decade.