Plant and Machinery (Hansard, 16 January 1992)

§ 6. Mr. Hayward
To ask the Chancellor of the Exchequer what was total investment in plant and machinery in 1979, 1983, 1987 and 1991.

§ Mr. Mellor
Measured at constant 1985 prices, plant and machinery investment was £19.7 billion in 1979, £19.4 billion in 1983 and £25.9 billion in 1987. Complete figures for 1991 are not available, but in the first three quarters plant and machinery investment was at an annual rate of £29½ billion, and 52 per cent. above its level in the comparable period of 1979.

§ Mr. Hayward
It is important that the figures confirm that positive policies are being pursued. Will my right hon. and learned Friend say how we compared internationally in the 1970s and the 1980s?

§ Mr. Mellor
The figures reveal the full extent of the increase in investment in the 1980s as a result of the Government's policies, an increase which has been maintained even during this period of recession. In absolute levels, we have fallen off only from the historically high 1980 figures. Comparison with other OECD countries is extremely interesting. In the 1970s, the average increase per annum in business investment in the Group of Seven was 3.1 per cent. whereas for the United Kingdom it was 2.3 per cent. In the 1980s, the average increase in the Group of Seven was 4.6 per cent. and in the United Kingdom it was 6.8 per cent.

§ Mr. Robert Sheldon
Has the right hon. and learned Gentleman not been listening to the chorus of demands from the CBI, from the trade unions and now also from a number of Conservative newspapers for an increase in capital allowances for manufacturing industry? Why does he not take note of that widespread feeling?

§ Mr. Mellor
We do take note of that feeling. The right hon. Gentleman, who was a Treasury Minister throughout the lifetime of the Labour Government, will appreciate that figures such as those that I have just disclosed to the House would have been regarded as a complete impossibility in his time.

§ Mr. Budgen
Does my right hon. and learned Friend agree that the level of investment is most of all decided by the real rate of interest? Does he also agree that there has been a noticeable change of opinion in the business community, in that in 1990 it thought that we could go into the exchange rate mechanism without any disadvantage whereas it is now beginning to realise that the ERM obliges us to have a higher exchange rate and higher real interest rates than are appropriate for domestic needs?

§ Mr. Mellor
I do not know whether my hon. Friend read Gavyn Davies's recent article, which showed that what most greatly influences investment is availability of markets and demand, and that running costs come very much second to those factors. Evidence shows that expected productivity in unit labour costs of British industry are more competitive now than they were when we entered the ERM.