HC Deb 10 June 1992 vol 209 cc329-68
Mr. Chris Smith

I beg to move amendment No. 2, in page 12, line 46, at beginning insert '(1)'.

The Chairman

With this it will be convenient to take amendment No. 4, in page 12, line 47, at end add— `(2) Where a company whose activities consist— (i) wholly or mainly in the manufacture of finished goods, partly finished goods or materials, and

Mr. Smith

The purpose of the amendments is to provide enhanced first year capital allowances for investment in plant and machinery by manufacturing industry. The debate takes place against a background of continued manufacturing decline in this country. For 13 years, our manufacturing sector has been neglected by a Government obsessed with the purported virtues of market forces and blind to the needs of a crucial part of our national economy. The devastation began in 1980 and 1981, when we lost a quarter of our manufacturing capacity, but the recession that we are still living through has compounded the problem.

As a country which once prided itself on being the workshop of the world, since 1979 we have seen our manufacturing performance slip to the bottom of the international league. We have performed worst out of all the OECD countries on manufacturing performance in recent years. From 1974 to 1978, manufacturing accounted for nearly 30 per cent. of our GDP. Last year, it was less than 22 per cent. Manufacturing is not the be-all and end-all of our economy, of course—the service sector remains every bit as important—but we ignore and neglect manufacturing at our peril. It is, and will always be, the principal internationally traded part of our economy. We make and sell goods or we falter. The choice is entirely clear. It is just a pity that that cannot be recognised so readily on the Conservative Benches.

In 1983, for the first time since the industrial revolution, Britain imported more manufactured goods than we exported. Ever since that day, throughout the windfall of North sea oil, throughout—indeed, perhaps because of —the Lawson boom, and throughout the subsequent impact of recession, we have continued to be in deficit. That is the manufacturing background against which the debate takes place. That is the legacy of the Government's time hitherto in office.

If manufacturing output has performed poorly—we should remember that even the Government admit that it fell by 5.25 per cent. in 1991—the picture in manufacturing investment is even bleaker. In the past year, manufacturing investment fell by 11 per cent. At constant prices, there is less investment now than there was in 1979. What is worse, in every one of the eight years following 1979 there was less investment than there had been in 1979.

While competitor economies, especially in Europe and Japan, were increasing their investment performance, we reduced ours. That is no way to prepare our economy for the challenges of the single market. In the past two years, the picture has been similar. Only last week, the European Commission published comparative figures on investment performances in the various countries of the European Community. In terms of investment in equipment and looking at volume rather than merely value, they show a minus figure for investment in the United Kingdom in 1990—a decline of 3.8 per cent. The European average was a plus figure of 4.8 per cent.

In 1991, the picture was worse. There was a decline in the United Kingdom of 11.8 per cent. but a decline in the European average, which is sharply affected by the United Kingdom figure, of 0.5 per cent. The prediction for 1992 is a fall in the United Kingdom of 4 per cent. and a rise in the European average of 0.2 per cent. Those figures show clearly that, consistently in the past two years and into this year, we are performing substantially worse in manufacturing investment and equipment than the average—let alone the best—performers among our European partner countries. We were told by the Government in the Red Book published at the time of the Budget that the prospects for the rest of the year were for a further fall of 0.5 per cent. in overall investment.

Of course, we must note the Government's tendency to juggle with definitions of investment. At one moment, they will talk about overall investment in the economy, at the next moment they will talk about business investment, and at other times they will talk about manufacturing investment. As always, the Government carefully select their definitions to put the best possible gloss on their failures. However, even if we take the Government's favoured measure—overall investment—their prediction of a further decline of 0.5 per cent. this year is open to question. Let us consider the evidence. The Central Statistical Office published figures last Thursday predicting a 2 per cent. fall in the investment of British firms surveyed. There is no 0.5 per cent. there—a fall of 2 per cent. is predicted.

The first quarter survey by the Association of British Chambers of Commerce showed a 3 per cent. negative figure for intentions to invest in manufacturing plant and machinery—down from the 2 per cent. negative figure in the fourth quarter survey last year. The independent averages compiled by the Treasury show a similar picture. The average of non-City, academic and institutional forecasts for the coming year shows an average decline of 1.5 per cent. in gross fixed investment. Only one out of the 12 institutions agrees with the Government that the fall is likely to be 0.5 per cent.

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According to 16 City firms surveyed in gathering independent forecasts, the picture there is even worse: they expect a decline of 2.3 per cent. in gross fixed investment. Out of 16, only two agree with the Government that the decline will be 0.5 per cent. or less.

What of the Government's position? We read with interest in The Daily Telegraph yesterday—not the source least likely to be favourable to the Government—a report which said: The Treasury is to scrap its one per cent. growth forecast for 1992–93, following a poor first quarter and the absence of any evidence of any recovery since then … the Treasury team has cut its growth forecast to under ½ per cent. If the growth forecast is being revised downwards, that obviously has immediate implications for output, unemployment, public sector finances, the public expenditure round and, most probably, investment levels.

We ought to be told in the clear light of day whether The Daily Telegraph report is correct. Have Treasury growth expectations been more than halved? What impact will that have and is it expected to have? I hope that the Financial Secretary will have the courage and decency to tell us when he replies to the debate.

Whichever way we look at it, the picture of manufacturing investment is far from healthy. It has fallen sharply in the past two years and is still falling. Our amendment seeks to reverse that decline. Investment is a crucial preparatory economic activity. If investment lags behind recovery and demand—worse still, if it does not respond to or predict a recovery in demand—the supply of goods will not be there, our dependence on imports will increase, and the imbalance between supply and demand will become even more severe.

Investment in manufacturing industry is vital now if we are to achieve anything like a sustainable recovery in the years to come. Enhanced capital allowances such as those proposed in our amendment would help enormously in stimulating investment. Our amendment is carefully targeted. It is aimed at manufacturing industry in particular, and specifically at plant and machinery. It raises the first year allowance, for a period of one year only, from 25 per cent. to 40 per cent. It would provide a direct incentive to firms to bring forward investment decisions that might otherwise be postponed—sometimes indefinitely.

We know from the experience of 1984 to 1986 that capital allowances work. They are not perfect—no fiscal stimulus ever is—but they can help. That is why the Confederation of British Industry, the Engineering Employers Federation, and the Trades Union Congress called for enhanced allowances, and why business men throughout the country endorse precisely the proposal contained in our amendment.

Tom O'Connor, chairman of the CBI's Small Firms Council, said last September: An increase in the rate of depreciation allowance for plant and machinery from the current 25 per cent. would provide a powerful and direct stimulus to small companies' investment. The economy would benefit: as growth increases so will revenues from business, in the form of corporation tax.

The only person who does not seem to agree with the need for enhanced allowances as a one-off stimulus for investment activity is the Chancellor of the Exchequer. He and his colleagues have consistently ruled out the case for capital allowances. They accuse us of dirigiste tendencies in advocating them, but that is total nonsense. Perhaps the Chancellor ought to consider the words of the President of the Board of Trade who in 1987, in an earlier incarnation, wrote an extremely interesting book, "Where There's a Will". It praises, in particular, the Japanese approach to the relationship between Government and industry. The right hon. Gentleman wrote that the Japanese have done the very thing which we pretend no government can do: they have targeted the world marketplace and, with a combination of domestic competition and taxpayer support, they have come to capture an increasingly large share of it. Do we really think our companies can win without the backing of our government when the consumer appetite in Britain is so eagerly fed by imports from a country whose economic and industrial effort is so single-mindedly directed? That puts the case in a nutshell.

This country needs Government support of manufacturing industry in particular—especially in the form of fiscal stimulus of the kind that our amendment proposes. That cannot completely ensure effective and sustained recovery, but it would be a key part of the required package.

The Government's record on manufacturing investment is appalling. In real terms, the level is now lower than when the Tories took office in 1979. Britain is the only country in the Community to have suffered in that way. Worse still, the value of investment in our manufacturing industry is still falling. In the past year, it fell by a staggering 11 per cent., and Government figures published last week show that the decline is continuing.

Investment in plant and machinery is the seed corn of future wealth creation. Unless we invest now, we shall not produce goods, provide jobs, make sales, and achieve growth in the years ahead. That is especially true of manufacturing industry—yet the Tories have neglected and denigrated its importance for far too long. With our balance of payments deficit already starting to rise again, nothing is more crucial than providing a boost to manufacturing investment. Our amendment would achieve precisely that, and I commend it to the Committee.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

In one of the numerous speeches that have been made in the House on the Maastricht treaty in recent months, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) reminded us that the German economic miracle was not created by the Bundesbank but was the consequence of innovative industrial investment by German companies—and that, for all the changes that might occur in economic and monetary union and among the central banks, the ultimate test of an economy is whether it invests in manufacturing the products that consumers want.

I have had the privilege of representing for more than 20 years a community that began the industrial revolution. It had iron and steel works in the 18th century, and holds to the traditional belief that manufacturing is a good thing. This country seems to have lost its appetite for making things, and now believes that there are other ways of sustaining the economies of communities such as mine. That has proved to be an illusion.

The Financial Secretary spoke of his pupillage under Mr. Peter Walker. We all had our pupillage under him. When he was Secretary of State for Wales, he was our new economic whiz kid for the best part of two years. He used to travel around boasting that the Principality supported more jobs in banking than in mining. I never understood the point he was making. Perhaps he was suggesting that it was a good thing that there were fewer jobs in mining, or that at least there were alternative jobs in banking. We did not understand why they could not be complementary. Why should it be thought that miners were competing for jobs with bankers? Nevertheless, that is the basis on which, for the past two or three years, we were sold an alternative economy.

It was suggested that the service sector would be our exciting new saviour, but in the past year or two we have started to see insecurity in the very sector that was supposed to provide our salvation. The recent threat of a takeover by Lloyds of the Midland created a wave of insecurity, and taught us how wrong it is to attempt to rebuild the economy of a community such as mine on the service sector.

It would be all right if that sector had brought to our communities the sophisticated information technology that characterises today's new-style, high-class financial services, but it has not done so. Instead, we have seen only a spate of DIY retailers—large sheds selling DIY goods of one kind or another. They are heavily dependent on the community's purchasing power, so other jobs must exist to create it if those new retail activities are to survive. [...]owever, cuts are occurring even in that sector in communities such as mine.

The only modern inward investment in my community has come from the Japanese, who were attracted by successive Governments. The first to establish itself in my constituency did so under a Labour Government in the 1970s. The most recent new project was announced 12 months ago.

Inward investors require two things. First, they are looking for a work force trained in manufacturing. The real victims of the recession and the collapse of manufacturing investment in my community, apart from companies, have been the manufacturing training programmes and manufacturing training opportunities.

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Great public corporations, such as the British Steel Corporation and Hoover, offered great training opportunities to young people in my constituency, but, in the past decade, they have closed down their manufacturing training schools. National vocational qualifications and training and enterprise councils have not replaced the training infrastructure, which was an intrinsic part of the manufacturing communities that I represent.

Sadly, in communities like mine, we are training to obtain yesteryear's skills on yesteryear's machines. That is the real tragedy. Inward investors ask, "Where are the modern skills and a trained work force? Where are the work force who understand the concept of total quality management and understand a modern production line rather than the old-fashioned ones?" Because of the lack of manufacturing investment, people in my area are being trained on machines, and therefore for skills, that are already out of date. The problem is not only a lack of manufacturing investment, but the fact that that lack has led to the sacrifice of the training skills in our communities.

My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) has raised an important fundamental principle that is essential to the redevelopment of the economy in areas such as mine. As a result of inward investment, we desperately hope that the development of component making and the provision of services to new manufacturers will play a part in our manufacturing salvation. There have been some exciting success stories, such as Nissan in the north-east and Sony in Bridgend, where the resourcing of components has begun to create alternative manufacturing job opportunities in smaller companies.

I have been involved in prompting, cajoling, pleading with and begging the Welsh Development Agency and a succession of Secretaries of State to take the supply development initiative seriously. It would enable local companies to service, feed and deliver components to the occasional new company that we manage to attract to our areas. That is the way to increase the number of manufacturing jobs in our society. In the present climate, in which companies face cripplingly high interest rates, a lack of liquidity and the absence of proper manufacturing incentives, manufacturing supply development initiatives are simply dreams rather than practical propositions.

The desperate need to create a new manufacturing training programme and the opportunity to develop supply development initiatives are dependent on a new spirit, attitude and set of incentives designed to assist manufacturing in communities such as mine.

Mr. Tim Smith (Beaconsfield)

I apologise to the hon. Member for Islington, South and Finsbury (Mr. Smith) because I was not present at the start of his speech. However, I listened carefully to the remainder of what he said.

Although the hon. Gentleman's amendments are well intentioned, they are misguided. They are well intentioned because everyone wants a strong manufacturing base and increased manufacturing investment in the United Kingdom. The question is whether it makes sense in tax terms to discriminate positively in favour of manufacturing and, by definition, against other forms of investment.

Labour Members have consistently had difficulty in coming to terms with the fact that, in an expanding economy, manufacturing, by definition, tends to constitute a smaller and smaller proportion of national output. In Britain, it constitutes about 25 per cent. of output, but in other economies it accounts for a much smaller proportion. That is a sign not of failure but of success. It is a sign of overall growth, because there is a finite limit to the demand for manufactured goods by consumers. Consumers with large disposable incomes have a greater propensity to spend on increased services, such as leisure, tourism, sport and other service products.

Labour Members also find it difficult to appreciate that manufacturing businesses have tended to concentrate more and more on their core activities. For example, they may have carried out one particular function that was important but ancillary to the core business, in-house, but today they tend to contract out that service.

The successful American company, Mars, which is based in Slough, ran a large transport business, which was an integral part of its manufacturing business. A few years ago, it sold the transport business, through a management buy-out, to the people who ran it. Therefore, that is now a separate business and, for the purposes of the standard industrial classification, is now categorised as a service rather than as a manufacturing business. Nothing had actually changed, but Mars, like many other companies, had decided to concentrate on its core manufacturing activity and to contract out the important support services.

The hon. Member for Islington, South and Finsbury said that capital allowances work, and he cited the period from 1984 to 1986 to support his proposition. However, that proposition depends on what one means by capital allowances and what one means by work. The hon. Gentleman picked a strange period, because it came immediately after the Lawson reforms. The great advantage of, and the important element in, the Lawson reforms was that the standard rate of corporation tax was reduced from 52 to 35 per cent. Since then, the Treasury has further reduced the figure to 33 per cent., as we can see from clause 19.

Mr. Chris Smith

The reason I cited that period was that the Lawson reforms were announced in 1984, and they were introduced in 1986. In the intervening period, when the threat of the removal of capital allowances was hanging over British industry, manufacturing investment increased by 19.1 per cent. in 1984 and by 14.7 per cent. in 1985. It was clear that the existence of capital allowances, combined with the prospect of their removal, acted as a powerful incentive for investment to take place.

Mr. Tim Smith

The hon. Gentleman is almost right. The allowances were not announced in 1984 and introduced in 1986. There was a three-year transitional period, in which the rate of capital allowance was reduced by a percentage per annum. I think that the transitional period ran for three years, during which capital allowances were gradually phased out. I accept that, in that period, some investment was brought forward to take advantage of the higher rates of allowances.

When I worked in industry in the 1970s and a 100 per cent. capital allowance existed, there was no doubt that, at the end of the financial year, we carefully considered whether we could make any additional investment because the rate of allowance was so high. Such investment was made for the wrong reasons. It is quite wrong for any commercial decision to be taken for tax reasons.

If commercial decisions are taken for tax reasons and not on their commercial merits, taxation can distort decision making. That happened in the 1970s, when we had a high rate of corporation tax and high capital allowances. From my experience, I can tell the House that that is what happened. We should not focus on the quantity of investment only: we need to focus on its quality.

Mr. Clive Betts (Sheffield, Attercliffe)


Mr. Smith

I shall give way in a moment.

Over the past 30 to 40 years, there was no shortage of investment in eastern European countries. The result of that investment is derelict and serves no useful purpose at all. The investment was totally and utterly useless, because it was not part of a market economy and the products produced were quite unsaleable.

Mr. Betts

The hon. Gentleman seems to be saying that taxation distorts commercial decisions. Is the logic of that that there should not be any taxation in the commercial arena and that, far from changing allowances, there should be no allowances to encourage investment?

Mr. Smith

The object of taxation is to raise revenue for the Treasury. If we were in the fortunate position of some countries, such as some states in the middle east, we would not need taxation, which has no virtue of its own. There is a good intellectual case for not having corporation tax and for taxing only company profits that are in the hands of shareholders. That is rather wide of the debate, but it is an interesting argument against corporation tax.

Any corporation tax is a burden on companies. The main source of investment in the United Kingdom is not borrowed money or shareholders' money, but retained profits. That is not widely understood. That forms the largest source of investment, and the larger the proportion of profit removed by the Treasury the smaller the proportion that remains for investment. That is why any sensible taxation system should be based on the lowest possible rate. That applies to income tax as much as to corporation tax, and there should be as few allowances as possible. That will lead to the fewest possible economic distortions.

Politicians always want to interfere in industry to try to achieve this, that or the other worthwhile objective. That did not work in the 1970s, and it would not work now.

Mr. Beith

The debate is a re-run of one that we had a year or 13 months ago when virtually the same amendment was tabled. Since then, I have not become any more convinced by the argument. I accept the analysis by the hon. Member for Islington, South and Finsbury (Mr. Smith) of the worrying state of investment in manufacturing and I share some of his general observations. However, that is some way from being convinced that the proposed method of operating the tax system would bring about the sensible investment that is required. That is a large assumption. To start with, one has to distinguish between manufacturing and services, and that is a difficult and unreal distinction.

It is not necessarily detrimental to a country to have more investment in services than in manufacturing. The line is arbitrary, and activities which some people might consider wholly undesirable are to be found in manufacturing while activities which would pass the highest test of acceptability to every Labour Member are found on the service side of the line.

There is no established correlation between the size of a country's manufacturing sector and its general economic performance. Manufacturing is desirable, but it is not an index of overall economic success. It is therefore difficult to justify a pro-manufacturing or pro-services stance. That has not been shown to be a direct route to overall economic success.

In assessing the amendment, we must consider whether investment decisions taken on the basis of this year's tax relief would be significantly different, and, if so, whether they would be significantly better. It is arguable that they might not be significantly different and that one year's tax relief is not enough to tip the balance on many major investment decisions. Would it indeed be right for that to tip the balance, and what are we discounting against that tax relief? How marginal was the investment decision, and what assumptions are made about future achievements for which one year's tax relief will pay? At best, it is a questionable proposition.

More effort must be directed to justifying the expenditure of large amounts, especially if the resources could be used to improve the system in other ways. I shall argue on a subsequent amendment that it might be better to give business the security of knowing that inflation would not erode the allowances that it enjoys under the tax system. That would enable it to predict with reasonable accuracy the relationship between the tax system, the company's financial position, and the value of its assets. No doubt the Minister will have estimated the cost of accepting the amendment.

In criticising the effectiveness of the proposal, and in saying that its effect, if any, might be to lead to bad investment decisions, I do not dissent from the expressed desire for greater investment—but the case is not proven that such measures will lead to good quality investment decisions in manufacturing.

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Mr. Jim Dowd (Lewisham, West)

I rise to speak for the first time in the Chamber. When I was preparing my speech I asked someone whose recollection of when he made his maiden speech is dim and distant about the sort of reception that I could expect. I was told that the Chamber has three types of people: those on the Front Benches who are present because they have to be; those who have just spoken and who will stay for a decent interval before leaving; and those who would be waiting for me to sit down so that they could speak. I shall therefore do what I can to keep my speech brief.

My first thanks go to the people of Lewisham, West and I pledge to work on their behalf. My constituency has had a habit—I use the past tense—of changing its representatives at fairly regular intervals. I am sure that it has outgrown that, however, and can look forward to some decades of uncharacteristic tranquillity. The constituency covers a fairly anonymous part of inner suburban London—Forest Hill, Catford and Sydenham. I am sure that not many Members are familiar with it because it is so far from a tube station and the paucity of black cabs means that journalists, in particular, regard it as an extreme adventure to go that far. In common with millions of people throughout the British Isles, however, the people of Forest Hill, Sydenham and Catford are decent, hard-working and industrious and judge their public representatives harshly. I shall be happy to rest on their future judgment.

The constituency has had a collection of representatives in the House. The father of the right hon. Member for City of London and Westminster, South (Mr. Brooke), who was in the Committee a short time ago, represented the constituency for a short time just after the war. John Maples was my immediate predecessor. Politically, he and I were about as opposed as it is possible to be on most things. In his maiden speech some nine years ago he called, rather inauspiciously, for the introduction of a poll tax. He even called it that at the time. He then spent some years learning to call it a community charge. In the world outside, one can always recognise Ministers or their predecessors because they are the only people who talk about the community charge—the rest of the world calls it the poll tax.

As I have said, I did not get on with Mr. Maples politically. He strongly supported the abolition of the Inner London education authority, a blow which inflicted grievous damage on the education prospects not just of children but of almost the entire population of inner London. He opposed the establishment of a London-wide authority, the absence of which has damaged the prospects of London people. Despite our political differences, however, I found Mr. Maples helpful and courteous and I wish him well in whatever lies before him. I am led to believe that he is well thought of in certain circles in the Conservative party, so perhaps we shall see him somewhere else. I suspect that the people of Lewisham have taken permanent leave of him.

The hon. Member for New Forest (Sir P. McNair-Wilson) represented Lewisham, West for a couple of years back in the 1960s, as did the now Minister of Agriculture, Fisheries and Food.

Mr. Paul Boateng (Brent, South)

Did he?

Mr. Dowd

My hon. Friend should know that. I was reminded of the right hon. Gentleman's tenure of office in Lewisham only the other day when I heard a farmer being interviewed on the radio. The interview took place the day after the right hon. Gentleman returned from discussions in Brussels on the reform of the common agricultural policy. The farmer was making some fairly unenthusiastic comments about the Minister and at the same time there were strange noises in the background. In a broad west country accent, the farmer said, "No, that be not John Gummer—that be Crocus the pig." That was on "The World At One". The Minister is remembered in Lewisham, West.

Perhaps my most illustrious predecessor was Christopher Price. He made a considerable mark and is well remembered for his efforts. He is well remembered, especially in these times, for the work that he did in what became known as the Confait case. It was one of the earliest exposures of poor practices in the administration of justice and in the processes of the Metropolitan police. Christopher Price was tenacious for many years. I believe that many hon. Members who have followed in his footsteps to some extent examined the way in which he pursued justice in the Confait case. They have gone on to reveal many of the sad but damning miscarriages of justice that we have seen in recent times.

That is a broad outline of Lewisham, West and of those who have represented the constituency in the past.

I am grateful to be able to speak in the debate because my background is in engineering, which is the largest element of manufacturing industry. I disagree with those who have said that the plight of manufacturing industry is a tribute to our success. I am reminded of the comment that if we have many more successes like this, we shall all be ruined. The economy has always relied on a strong manufacturing base and it will continue to do so for the foreseeable future. That being so, we need to do what we can to nurture manufacturing industry.

I accept that an enlightened taxation regime alone will not enable manufacturing industry to thrive and flourish. That alone will not make the difference between success and failure. I am certain, however, that such a regime provides a framework around which much can be achieved. Without a sympathetic, understanding and supportive industry, Britain will dissolve and enter into a stately decline over the years as other nations overtake us one by one, whether they be our European competitors or the emerging industrial powers of the far east. Such a decline would have grave economic and social consequences for the people of Britain.

The hon. Member for Beaconsfield (Mr. Smith) asked whether, if we provide tax incentives for manufacturing, we shall discriminate against other forms of investment. My short answer is that we would and we should. Manufacturing strength is the key to the wellbeing of our competitors in Europe and throughout the world. Their pre-eminence in industrial and economic terms is built on their manufacturing base. Until we are able to emulate them, we shall be in terrible trouble.

The manufacturing sector is losing an enormous number of jobs. At the same time, production is in decline. That is one of the consequences of the lost jobs, many of which were skilled. We are losing skills and Britain is in danger of providing the tin bashers of Europe. That will happen if all the high-value-added jobs go abroad. If that happens, we shall be lucky if we are able to attract, by tax policies as much as anything else, investment by overseas multinationals for the assembly of high-tech goods which are manufactured elsewhere. There is the danger that we shall become little more than an assembly operation.

My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) talked about training. In 1967, I became an apprentice telephone engineer with what was then the Post Office. That was before all this British Telecom nonsense and when the Post Office was something worth while. During 1967, when I was 16, about 25,000 apprentices were taken on by the Post Office; last year, British Telecom took on about 100. That is what happens when a manufacturing skills base is lost. Opportunities are lost for young people and communities become unbalanced.

I went on to work for Plessey, which was taken over by the consortium of GEC and Siemens. I am not entirely au fait with parliamentary privilege, so I shall not say precisely what I should like to put before the House. Those who have expressed their views of Arnold Weinstock outside the Chamber are currently before the courts, so I shall not be too provocative. There is a strong likelihood, however, that GEC-Plessey Telecoms, which is the only large-scale British telecommunications manufacturing company, will be entirely in German hands in the near future. Much of the high-value work that is carried out on modern telephone digital systems will he undertaken in Munich and Berlin and British plants will be reduced, if not closed.

I am talking about good telephone systems. Hon. Members on both sides of the House know that they are good because the one used in the Palace of Westminster was manufactured by Plessey and it functions extremely well. On the underside of the telephones that most of us have on our desks—large white ones with digital displays—there is the statement that they were made in the United Kingdom. That is actually a slight fiction. On the display side of the telephones are two red lights, the message waiting light and the call diverted light. Those are the only two items that were made in the United Kingdom. The telephones were shipped here as complete units, having been manufactured by Nitsuko in Japan. When they arrived here, the two light-emitting diodes were added. That qualified the telephones to be classified as made in the United Kingdom, but all the real work was done elsewhere.

I shall bring my remarks to a close because I have spoken for slightly longer than I intended. A healthy service sector is important, as everyone realises, but only as an adjunct to a firm manufacturing base. The British people will not survive if they are restricted solely to taking in one another's washing or cleaning one another's windows. There must be a firmer base for our prosperity across the range of engineering and industrial activities, which sadly have been in decline.

It is possible to recover. Everyone in the Chamber will recall that a few decades ago the title, "Made in Japan" was regarded with derision. We bought Japanese goods only if we could not afford better, or if they were the only goods available to us. These days, that title means quality and value for money. It is a lesson that we would do well to learn. It is Britain's future in manufacturing that will serve the British people best in the long run.

5.30 pm
Mr. Peter Mandelson (Hartlepool)

I warmly congratulate my hon. Friend the Member for Lewisham, West (Mr. Dowd) on his excellent maiden speech, which reflected well on himself and his future contributions in the House and his constituency. He described his constituency as an anonymous place, but there is little doubt in our minds this afternoon that, if he continues to make contributions such as he has made today, his constituency will quickly cease to be anonymous. I warmly congratulate him again.

Amendment No. 2 addresses the problem of the many firms which are postponing or abandoning much-needed investment decisions, prolonging the recession and further weakening Britain's long-term manufacturing strength. By enabling a company to offset more of its investment costs against its corporation tax liability, an increase in allowances would stimulate and bring forward much needed industrial investment in Britain.

The independent Institute of Fiscal Studies estimates that the change contained in the amendment would lead to an increase in investment of 6.5 per cent. That, in its estimation, represents an increase in manufacturing investment of about £3.3 billion. Because the proposal is time-limited to one year, essentially so, it provides a powerful incentive for investment decisions presently in the balance to be brought forward, and would thus aid much-needed recovery. That is why we are promoting this important amendment.

But let us be clear why we are doing so in the context of the wider argument that we need to have today about the importance of manufacturing in Britain, about the relationship between Government and industry in Britain and the conditions in which business can flourish. Let us be clear why manufacturing is so important.

Manufacturing has been, is and always will be the main tradeable part of our economy. It is literally Britain's means of paying its way in the world. The idea that we can simply replace our manufacturing base with the service sector is not only economically wrong but underestimates the extent to which a thriving service sector depends on a thriving manufacturing sector. As this month's balance of payments figures demonstrate all too clearly, the principal constraint upon our economic recovery, even when it comes, will be the inadequate base of our industry and our inability to increase the tradeable part of the economy.

Of course, no one would claim that any lone action by Government, any single change in the tax regime or any specific increase in capital allowances would transform industry's prospects or performance. Instant solutions are not available, and the Labour party is not putting them forward. But that is not an argument for doing nothing, which seems to be a view held by many Conservative Members. Lying behind the amendment is the Labour party's contention that the Government simply must exercise much greater responsibility for supporting and encouraging the manufacturing sector.

Why, during the past 13 years, have the Government turned their back on manufacturing in the way they have? It was not just a consequence of misguided economic logic, but a product of political prejudice, with manufacturing repeatedly dismissed as an obsession of the Labour party.

By a uniquely destructive combination of policy measures, the Conservative party took a hatchet to manufacturing in Britain—hiking interest rates and the then value of the pound, massively increasing the price of electricity and gas supplied to industry, increasing VAT to 15 per cent. which affected service as well as manufacturing industry, and dismantling crucial instruments and areas of regional development policy. By all those means, that uniquely destructive combination of policies, the Conservative party wiped out 25 per cent. of Britain's manufacturing in its first five years in office.

The effects of those locust years were disastrously experienced in my constituency. With the closure or retraction of major steel, marine engineering, electronics and light manufacturing works over that period, no fewer than 10,000 jobs were lost in Hartlepool in that period.

In the current recession, the closures and the loss of jobs have continued. In the past two years new emerging high-tech firms have been left to flounder. The loss of high-precision engineering at Rolls-Royce in my constituency resulted in 450 redundancies. The closure of Isocom, making precision electronic parts, created a further 90 redundancies.

What a tragedy—not just that the huge, wanton destruction of productive capacity has taken place in new as well as traditional industries, but that, in the second recession, like the first created by the Government, the Conservative party failed to take the measures necessary to spur the reinvestment needed to build up manufacturing afresh.

There has never been any secret about the path to economic recovery of towns such as Hartlepool and the country as a whole. That path depends above all on innovation, on developing new products and new processes to replace those that have gone. It rests on converting scientific inventiveness and research into competitive production and tradeable goods. The Government recognise that need only in their rhetoric. They fail to take the action necessary to make it a reality.

In the past 10 years, the Conservative Government have cut and cut again public support for research and development in Britain. The result is that, for every £1 spent in Britain on discovering and developing new technologies, £1.50 is spent in Italy, £2 in France and £2.35 in Germany.

Government figures published only this week reveal that, despite the welcome increase in spending on research and development by many British companies, we still as a nation spend less than half the amount per employee on research and development that is spent by companies in the United States and Germany.

On the eve of the completion of the single market, the Germans, with the active backing of their Government, will invest about £3,000 for each manufacturing worker, and the Italians and the Americans will invest about the same. The Dutch will invest more than £6,000. Yet no more than £1,800 will be invested in each British manufacturing worker.

There is just no comparison between what is being done in Britain for manufacturing and what is being promoted by the Governments of all our industrial rivals. Yet we compete in the same global marketplaces and are subject to the same intense competitive pressures as our rivals.

It is not as if there is a shortage of inventiveness in Britain. There is no absence of enterprise in towns across Britain such as the one that I represent, yet what is so often researched in Britain is developed abroad. What is invented here is manufactured elsewhere. All too often, that is because neither the Government and their agencies nor the banks and their local branches will do enough to nourish new products and new firms from their inception. The Government still refuse to face up to that fact and to act on it.

We have heard that again today in contributions from Conservative Members. Their complacent, apathetic response to Labour's proposal this afternoon confirms the extent of the Government's indifference. It shows the depth of their insincerity when they talk of the needs of industry.

It is worthy of note that, in its Budget submission to the Chancellor in January, the CBI called for increases in investment allowances to help industry. It wanted the Chancellor to raise allowances for plant and machinery from 25 per cent. to 40 per cent., which is what Labour proposes today. I am happy to act as a mouthpiece for the CBI when it acts as a champion of British industry. There is no doubt what companies now want. Business men in my constituency are asking not only for much-needed economic stability but for banks that stick with them and a Government who are willing to use the instruments of regional policy to target incentives for location, expansion and innovation.

The message is clear, but who is listening in the upper reaches of Government? Following the general election, industry must have been heartened and encouraged to read some of the early newspaper stories that were spun from 10 Downing street. "Major focusses on industry", said the Financial Times; "Major puts support for industry at centre of post-election strategy", said another newspaper. Industry waited for the new initiative heralded by those headlines, eagerly anticipating the first decisive action of the new appointee, the right hon. Member for Henley (Mr. Heseltine). When the first blow was struck, however, it was not for the promotion of manufacturing but for the self-promotion of the man.

The right hon. Member for Henley decided to rename his job—not to emphasise industry, but to drop it entirely from his title. The Secretary of State for Trade and Industry became simply the President of the Board of Trade. What signal was that supposed to send to Britain's manufacturing firms? The right hon. Gentleman cared so much for industry that he could not even be bothered to retain the word on his letter heading. As the weeks have gone on, we have heard one presidential keynote speech after another—

The Chairman

Order. The hon. Gentleman is straying from his own party's amendment.

Mr. Mandelson

I am trying to put the amendment in context.

The Chairman

It is for the hon. Gentleman to judge how to do that, but he has not succeeded so far.

Mr. Mandelson

Let me try to return to the main argument.

According to the right hon. Member for Henley, the Government want to "take determined, positive action" to deal with the trade deficit and to promote the interests of manufacturing industry. That is the objective of our amendment. The right hon. Gentleman, however, boasts openly that increasing his Department's activity would mean increasing that Department's expenditure, and he says that he refuses to do that.

One is left with the unavoidable impression that what the right hon. Gentleman wants is not better relations with industry and the promotion and growth of the manufacturing sector but better press relations for the President of the Board of Trade. He is seeking not greater public support for industry and the manufacturing sector —which we seek in our amendment—but greater public attention for himself. If that impression is correct, the right hon. Gentleman's reputation will soon become the most rapidly squandered in government.

There are some in the north-east who have a keen interest in the growth of the manufacturing sector, and have voiced support for the amendment, and who retain some hope for the right hon. Member for Henley. One prominent business leader in the region, a former public servant, commented: "From what one hears, there are one or two things that he would be willing to do"—but quickly added, "only if his colleagues were like-minded, and from what I hear that is not so." Judging by what Conservative Members have said so far, most of those colleagues are assembled on the Front Bench today—including, I suspect, the Minister who is to reply to the debate.

5.45 pm

No one can take any satisfaction from the fact that the right hon. Member for Henley seems to be losing his battle against the intransigence and indifference of the Treasury in the course of his quest for the promotion of the manufacturing sector. Many managements and work forces have shared objectives, and feel an ardent desire to act in partnership within their local communities; they want to boost their businesses, and they want our amendment to be accepted. When they call for such measures, they are not engaging in special pleading, and they do not want to be featherbedded. All they want is a framework of support in which they can prove themselves.

That is why the Labour party will continue to champion the cause of manufacturing, and to call for the adoption of increased capital allowances for investment. We must do that: we have no choice, because so much is at stake for our constituencies and for manufacturing industry throughout the country.

Mr. John Townend (Bridlington)

I did not intend to speak, but I should like to make three short points.

It is a bit rich for the Opposition to try to blame the Government for what has happened to manufacturing industry. We all appreciate the importance of manufacturing, especially those of us who represent northern constituencies, but we must ask where the greatest declines have taken place. One of the main components of our current balance of payments deficit is the car industry deficit. Who destroyed the British car industry? It was not destroyed by a lack of capital allowances, or by a Conservative Government. It was destroyed by the car industry itself—principally the unions, with strikes, go-slows, bad quality and restrictive practices. We all remember the time when inspectors could reject only a certain number of cars coming off the line on grounds of poor quality, because if they rejected more the workers would strike.

Who destroyed the shipbuilding industry? We all remember a time when the order books were full, but then the boilermakers said, "We want to drill the holes in the hulls and we shall strike unless we get work."

The Chairman

Order. What is sauce for the goose is sauce for the gander. Let us return to the subject of capital allowances.

Mr. Townend

I think that what I am saying is relevant. The decline in manufacturing industry is not due to a lack of capital allowances; it is due to the trade union activities of the 1970s as much as anything else.

Training and education in the engineering industry have been mentioned. When the Opposition talk of the dearth of engineers, they always mention training, but they never mention education. We must remember that more and more of our able young people are going to university. Many youngsters who would once have taken apprenticeships at Rolls-Royce now opt for university instead. Regrettably, however, too few read engineering: they read history, sociology or business studies.

Those are the future captains of industry. In Japan, far more graduates have engineering degrees. When they move on to general management and become captains of Japanese industry, they have an engineering background. I think that we should encourage far more people to read engineering at university. Not enough are encouraged to do so while they are at school, and many do not want to because qualifying as an engineer is very hard work—much harder than reading history, sociology or business studies. Anyone who denies that has not studied engineering.

I do not think that capital allowances would play a major part in encouraging investment. Investment is being deterred by the lack of demand and by high interest rates. Despite reductions of 5 per cent. or 6 per cent., our interest rates are still high in real terms. Industry is looking for lower interest rates. If we achieve higher demand and lower interest rates, investment will follow. Even if capital allowances of 100 per cent. were offered, without demand investment would not be made—[Interruption.] Labour Members do not like to hear the truth.

The Government might consider a change which would be helpful and just. Capital allowances are based on written-down values. It therefore takes a long time to write off machinery. I ask my hon. Friend the Financial Secretary seriously to consider adopting the straight line method whereby machinery is written off within four or five years.

Labour Members should realise that the Government have created an environment for investment, a low tax regime, and good industrial relations. As a result, we have had more than 50 per cent. of Japanese and American inward investment into Europe, and we can see the resurgence of the British motor industry with the Nissan plant in Sunderland and the Toyota plant in Derbyshire. In 18 months or two years' time, with those Japanese companies based in this country, we shall win back our export markets and reduce the deficit in motor vehicles.

Dr. Roger Berry (Kingswood)

It is with much pleasure that I rise to make my maiden speech. I have long wondered what the corridors of power were like. Little did I realise that, one day, I would have a desk in a corridor and, a few days later, a telephone. No doubt, given the ministerial statement last week, docklands is the next place on the agenda for Members.

Like my hon. Friend the Member for Lewisham, West (Mr. Dowd), I received advice from colleagues about making my maiden speech and was told about the traditions. I put to one side my normal response to the word "tradition"—recalling that tradition is the democracy of the dead—and listened to what they told me. They said, "You must be non-controversial, must ay nice things about your predecessor and your constituency and, above all, must be brief." They did not say, "You must never plan to make your maiden speech in the Committee stage of the Maastricht Bill before you know the outcome of the Danish referendum."

My predecessor, Rob Hayward, paid me the compliment of referring to me in the Chamber before the general election. I assume that he did so in response to the vigour of my activities as Labour leader on Avon county council. In so doing, he established a new tradition in the House. I am aware of the tradition that new Members say nice things about their predecessor. Mr. Hayward established the tradition that existing Members say nice things about those who are destined to replace them. Notwithstanding our substantial political differences, I should like to place on record my gratitude for the work that he did for many constituents in Kingswood. I wish him well in the future.

The constituency of Kingswood straddles the boundary between the city of Bristol and the borough of Kingswood. Half the constituency lies within the city of Bristol, parts of which were previously represented by Arthur Palmer and my right hon. Friend the Member for Chesterfield (Mr. Benn). The half of the constituency in the borough of Kingswood—if hon. Members are still with me—was previously represented by my good friend, Terry Walker, and the hon. Member for Wansdyke (Mr. Aspinwall). I should like to thank them for my inheritance.

That list shows that Kingswood has a rich and diverse political history. It also has a rich and diverse industrial history. It used to be an important area of coal mining —it is no longer so—and it used to be an important area for the boot and shoe manufacturing industry, but today only one firm is engaged in that work. Today, most of my constituents work in aerospace, defence-related industries, other manufacturing industries, financial services, local government and the health service. Many jobs have been lost in all those sectors.

Unemployment, or, according to the Government's statistics, the number of unemployed claimants—a rather different figure—has trebled in Kingswood in the past two years. I say to the hon. Member for Welwyn Hatfield (Mr. Evans), who yesterday described the unemployed as "layabouts" and received no rebuke from his colleagues, that that is due not to a sudden outbreak of laziness in my constituency but to the fact that many manufacturing companies have shed hundreds of jobs. The list—Rolls-Royce, British Aerospace, DRG Cartons, Bendix Engineering, Avon Tin Printers—is very long. Hundreds of people have been laid off.

My unemployed constituents are not layabouts. They spend day after day and week after week looking for work. They are unemployed because work is not available. On their behalf, I resent the comment about them yesterday. My remarks reflect the views not only of my unemployed constituents but of unemployed people throughout the country and, I hope, of the majority of people.

Unemployment and record interest rates have caused mortgage misery for thousands of families in my constituency, as elsewhere. There has been a record number of home repossessions because people have lost their jobs and because mortgage interest rates have been so high.

The problem of homelessness in Bristol and Kingswood is second only to that in London. That is a result of the economic position in which my constituents find themselves. They want the Government not simply to sit on their hands but to take appropriate action. That is why I strongly support amendment No. 2. Measures to stimulate investment in manufacturing are not everything, and can never be, but they are an important part of a programme that any sane Government would propose to restore manufacturing and to reduce unemployment.

Yes, of course other things can be done to reduce unemployment, such as releasing local council receipts to allow them to build the homes that people need and to repair crumbling schools. Yes, of course there should be an action programme for the long-term unemployed and greater investment in training.

I say in response to the hon. Member for Bridlington (Mr. Townend) that, yes, more investment should be made in education as well. Before becoming a Member, I worked in higher education. I can tell the hon. Gentleman that the problem of underfunding in higher education is serious. I can tell him that Avon county council is working hard to train and educate young people. It is not helped when the Government's spending target requires the county council to make cuts of 12 per cent. or 13 per cent. in education year after year. The hon. Member for Bridlington was right—investment in education is important—but I would digress too far if I said any more about that.

6 pm

The importance of manufacturing was outlined earlier. Reference was made to the Lawson report. Mr. Lawson, a former Chancellor of the Exchequer, made a big point of saying that he failed to understand why manufacturing was especially important. I offer two reasons. First, manufacturing is the engine of the economy. It is the sector of the economy which, above all, is engaged in innovation and developing new products. It is an engine for growth, which is why the economies that grow the most rapidly are those with a strong manufacturing sector. Secondly, as has been said, our balance of trade is crucially dependent on our performance in manufacturing. Our economy is faced with a 0.5 per cent. predicted growth rate for this year—the worst growth rate for any of the European Community countries—and has an annual current account deficit heading for between £10 billion and £12 billion this year, following the most tentative signs of economic recovery imaginable. If such an economy is not in need of investment, I do not know what kind of economy is.

For those who can see, there is enough evidence to suggest that Britain's lack of competitiveness is a serious matter. Restoring that competitiveness is an essential part of any strategy to reduce unemployment in my constituency or anywhere else. For that reason, I urge hon. Members to support the amendment.

Mr. Alan Milburn (Darlington)

It is a pleasure to follow my hon. Friend the Member for Kingswood (Dr. Berry). His wit, passion and insight are a credit to the House and, like other hon. Members, I shall look forward to his contributions in the future.

I support the amendments tabled in the name of my right hon. Friend the Leader of the Opposition because, without them, the Finance Bill is a damp squib. I say that for two reasons. First, it is out of date even before it becomes the law of the land. The very economic predictions on which it is based have already been revised downwards as economic indicator after economic indicator and forecast after forecast have forced the Government to acknowledge that economic recovery is as far away as ever.

Secondly, the Bill tackles the wrong problems. The essential economic problem facing the country is not over-taxation but chronic under-investment and short-termism. The Bill will merely exacerbate rather than tackle that particularly British problem. Crucially, the Bill does nothing to encourage investment in the key manufacturing sector that forms two thirds of the country's visible trade, which is why the amendments proposed by the Labour party are so important. They will begin to close the yawning investment gap that has developed between Britain and our competitors.

According to the Organisation for Economic Co-operation and Development, in the decade after 1978 the United Kingdom's proportion of gross domestic product devoted to manufacturing investment fell from 3.3 per cent. to only 2.4 per cent., while that of France and Germany grew to 3.5 per cent. and 3.9 per cent. respectively. It is therefore little wonder that this country's balance of trade in manufactured goods went into the red for the first time since the industrial revolution and has stayed there ever since. Quite simply, our industries cannot compete because they lack investment in up-to-date plant and equipment. Between 1980 and 1989, the amount spent on manufacturing investment per employee in this country was only £1,980 a year. By contrast, in the United States and Germany it was £2,850 per employee, in France it was £3,300 and, finally and not surprisingly, in Japan it was £5,360.

The Government's attitude towards the crisis is one of utter complacency. It is as if the £1,300 million trade gap that opened last month did not matter, as if the manufacturing import bill had not risen by 8 per cent. in the previous year or as if the Confederation of British Industry's prediction of a further loss of 200,000 manufacturing jobs in 1992 was absolutely irrelevant.

My region, with its reliance on manufacturing, will again inevitably be one of the losers because of the failure of perception on the part of Ministers. In this recession, my constituency of Darlington has already lost 1,300 manufacturing jobs. Between September 1978 and September 1991, manufacturing employment fell by about 36 per cent. in the north as a whole. It will come as no surprise that in the decade after 1979 investment fell by 43 percent. in my region —the largest collapse of any region in the United Kingdom. Almost £3,500 million more would have been invested in manufacturing in the north between 1980 and 1987 if investment had remained at its 1979 level.

Two recent surveys of local businesses corroborate the picture of declining investment. According to the Association of British Chambers of Commerce's quarterly survey of investment intentions, the north-east's largest companies revised their investment plans downward by 5 per cent. during the first quarter of this year. In its first quarter review of business conditions in the region, the Northern Development Company reported that the balance of companies increasing exports sank to its lowest level for the seven quarters in which it had been undertaking its survey. Nearly one third of northern manufacturing companies were reported as cutting their work force. Inevitably, in this climate, the vast majority of surveyed firms were delaying their investment decisions.

The north's skills and enterprise are being fatally compromised by a Government who have given up the ghost with regard to investment in the regions. Indeed, the Government are contributing directly to disinvestment in areas such as the north as they deliberately dismantle regional policy. Only this week I received figures from Ministers at the Department of Trade and Industry that show that, since 1978, Government spending on regional financial assistance had collapsed by 85 per cent. in real terms in the north. In that year, the Labour Government were spending £158.8 million on regional assistance in the north. Last year, by contrast, the Conservatives spent just £23.6 million at 1978–79 prices.

While the Government have let Britain's regions go to the wall, other Governments have helped their regions to adapt to new industries. A renewed commitment to regional investment is now needed to give our regions the chance to compete effectively and to benefit from the single European market; otherwise, we face the prospect of a two-tier Europe developing, with regions like the north of England doomed to decline on the periphery of our continent. Such regions are brimming with ideas, innovation and enterprise, but they need investment and the companies there need an incentive to invest.

The Labour party's amendments represent a step in the right direction, towards a reinvigorated manufacturing base and a sustainable economic recovery, giving an immediate boost to manufacturing investment. Any failure to act now will forestall long-term economic recovery and, ironically, prove to be the Government's undoing. The chickens are already coming home to roost, as a weakened industrial base proves incapable of meeting even the weakened consumer demand during this recession. Inevitably, imports will go on rising and, with them, prices will rise. We shall no doubt then repeat the same mistakes that were made during the 1980s. The brakes will be slammed on once again and we shall be plunged back into recession.

There is another way—one that will stimulate investment to help British industry to compete and to export and, in particular, help regions like the north. The Confederation of British Industry reported in February this year, prior to the Budget, that it was seeking increased capital allowances along the lines that the Labour party is proposing today. CBI News in February said: encouraging investment does not mean taking risks with inflation. Indeed, a more flexible, more efficient and more productive business sector is essential if the economy is to grow without inflationary pressures developing and a high level of investment is a key element in achieving this. If the Government are not prepared to listen to the Opposition and take note of our amendments, I hope that at least they will listen to the voice of business.

Mr. John Hutton (Barrow and Furness)

May I add to the words of my hon. Friends my congratulations to hon. Members who have made their maiden speeches this afternoon, particularly my hon. Friends the Members for Kingswood (Dr. Berry) and for Lewisham, West (Mr. Dowd), who made highly articulate and impassioned speeches on behalf of their constituents. Although she is no longer in her place, may I also congratulate the hon. Member for Newbury (Mrs. Chaplin), who made a highly articulate and cogent maiden speech.

I wish to speak in support of the amendment in the name of my right hon. Friend the Leader of the Opposition and about its relevance to the engineering industries of the United Kingdom, particularly companies with a traditional association with the defence sector, which needs practical and tangible help from the Government if it is to succeed in moving successfully into new product markets.

Some of the great industrial and manufacturing centres of the United Kingdom are represented on the Opposition Benches tonight. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) spoke passionately about the last 12 years in his constituency and the effects of the Government's policies on manufacturing investment and employment in south Wales. All my hon. Friends could repeat such stories of the misery caused by the Government's policies on manufacturing investment. In the past two years alone, my constituency has lost 7,500 jobs, all in the manufacturing sector. I remind the House that Barrow and Furness has the highest proportion of people employed in the manufacturing industry of any constituency in the United Kingdom. We are suffering directly and visibly because of the Government's consistent failure to support engineering and manufacturing industries. The amendment proposes a new regime of fiscal encouragement to stimulate fresh investment in the engineering sector, which will benefit companies in my constituency.

The year 1991 was, without doubt, a bad year for manufacturing industry. The Engineering Employers Federation reported that engineering output continued to fall last year and no prospect of growth is predicted for the mechanical engineering sector either. The United Kingdom machine tool industry sees no sign of improvement this year. Manufacturing output has fallen from 11.8 per cent. of GDP in 1970 to about 8 per cent this year. OECD figures reveal that real growth in manufacturing output in the United Kingdom is the smallest of all our principal economic competitors. Growth in the United Kingdom was only 0.8 per cent. compared to nearly 10 per cent. in Japan, more than 4 per cent. in the United States, nearly 3 per cent. in Italy and nearly 2 per cent. in West Germany.

Mr. Barry Porter (Wirral, South)

Is it unreasonable to ask the hon. Gentleman to consider, in view of the attack that he has made on the Government's economic policies in the past 12 years, that, had the defence policies of the Labour party as evinced in 1979, 1983 and 1987 been followed, Barrow would have been a desert?

6.15 pm
Mr. Hutton

That is an utterly predictable and hopelessly outdated response. It must be apparent to the hon. Gentleman that my constituents wanted a Labour Government because they returned a Labour Member of Parliament to represent them in the House. [Interruption.] I shall return to the main theme of my comments and ignore the hon. Gentleman's sedentary and ignorant comments.

The last two recessions have reduced employment in engineering from 3.3 million in 1979 to only 1.9 million in 1991. The employment prospects of engineering companies continue to decline. The past 20 years have seen a consistent decline in engineering and the past 18 months of severe recession have only compounded those problems. That weakness in engineering can be clearly seen in the figures for manufacturing investment, which show that total manufacturing investment was lower in 1991 than in 1979, despite the windfall that came to the Treasury from North sea oil. Manufacturing investment has fallen as a percentage of GDP. The Government predict further falls in overall investment and I suspect that those falls may be larger than they envisage.

The challenge facing the Government, therefore, is to pursue a much more productive approach to encouraging investment and to accept that they should pursue any instrument or tool available to them to stimulate that vital investment in engineering. It is the Government's responsibility to the defence industries of Britain to support companies such as Vickers Shipbuilding and Engineering Ltd. in my constituency, which is anxious to move into new product areas. The amendment will support the efforts of many companies in my constituency.

For all those reasons, the amendment is important to the engineering industries of Britain. Increased capital allowances are an effective means of promoting new investment, as shown by many of the reports which my hon. Friends quoted this afternoon. We recognise that improving capital allowances in manufacturing industry, particularly engineering, will not produce a sudden splurge of new investment but it will produce an essential source of new investment for engineering companies and encourage them to invest. By time-limiting the new allowances to one year, as the amendment proposes, investment decisions will be brought forward. Our amendment would go some way towards putting right the signal neglect of manufacturing industry since 1979, and I endorse it.

Mr. Betts

First, I congratulate you, Mr. Lofthouse, on your appointment and my colleagues the hon. Members for Lewisham, West (Mr. Dowd) and for Kingswood (Dr. Berry) on their excellent maiden speeches on this crucial issue of investment in our manufacturing industries. After Margaret Thatcher was elected Prime Minister, a funny thing happened to some of my constituents: they had problems getting to sleep. Before anyone jumps to the wrong conclusion and thinks that perhaps the spectre of the lady on our television sets had something to do with it, let me tell the House that the problem had to do with noise. For years—indeed, for generations—my constituents who live near the industrial heartland of Sheffield, the lower Don valley, had gone to bed at night and listened to the rhythmic thumping of the drop hammers and forges which were the basis of the great steel and engineering industries of our city. Suddenly, within three or four years, that rhythmic sound stopped. Many of my constituents found that after the decline of that industry they could no longer get to sleep because they had been so conditioned to the noise and its lulling effect that its absence led to insomnia. Within four years, the powerhouse, not merely of Sheffield industry but of the British steel and engineering industry, was cut out. Highly specialised and highly skilled though it was, it became largely redundant.

The decline began with short-time working. It continued with redundancies. It was followed by further redundancies, closures and the sale of machines, often to other countries that still saw a need for manufacturing investment. It was further followed by the removal of factories' roofs and then by the demolition of the factories; piles of rubble were left in their place. Then the Government acted: we had the introduction of derelict land grants. The Government's response to the collapse of industry in Sheffield was to offer grants to clear up the sites once the factories had been demolished and 40,000 jobs in one valley had been destroyed in fewer than 10 years. That is the record that my constituents have to look back on.

Certainly, a lack of investment by many of the firms played a part—that is why this amendment on manufacturing investment is so important—and subsidised imports from other countries played a part; yet, throughout that time, the one consistent factor in the Government's response was complete inaction—the same sort of inaction that characterises their approach to the Finance Bill and the amendment.

I am not one of those who argue that wealth can be created only by manufacturing industry. Nurses and home helps are an important part of wealth creation. However, historically, manufacturing industry has been a key element in the British balance of payments. Until 1983, we always had a surplus on our trade in manufacturing industry. It is significant that since 1983 we have had not a surplus in any one year. Nor am I seeking to argue that we can replace like with like. We cannot recreate the drop hammers and forges of the past. Yet the amendment is important because it is a signal that we do not regard British manufacturing industry as dead, although in many ways it is profoundly unhealthy and in need of the sort of assistance that our amendment would provide.

In the initial years of the 1980s while the Government failed to act, Labour local authorities often sat down with industrialists to work out in partnership some alternative way forward. Eventually, the Government introduced development corporations and had the idea of city challenge. Both ideas were imposed without consultation. They were flawed, but at least they signalled some recognition by the Government that some action was necessary, in particular to stave off the threat of a further decline in our older industrial areas.

Tonight we ask the Government to listen to our argument that so far action has been too little, too late and that therefore they should support our proposals. It is not only manufacturing industry that needs that response. Look at the construction industry and the unemployment there. Construction firms are going to the wall. Think how much they would benefit from any resurgence in manufacturing investment because it would create work for them.

Our suggestion of capital allowances is a positive move forward. What alternative are the Government offering? So far as I can see, little—indeed, nothing. That should not surprise us. Their record is deplorable. We are the only country in the European Community to have a lower level of manufacturing investment now than we had in 1979. There has been an 11 per cent. fall in manufacturing investment in the past 12 months and a 27 per cent. fall during the recession. Those figures come from Government Departments, so the Government cannot deny them. Manufacturing output is only 2 per cent. higher than it was in 1979. How does that square with the claims for a great economic miracle? Since 1979, growth in manufacturing output has been less in Britain than in any other major industrialised country. Even the CBI predicts further falls this year.

For the crucial issue of our balance of payments, that basic lack of manufacturing capacity means that as soon as there is any spark of recovery imports will be sucked in because our industry will not be able to produce the goods. The basic problem of a lack of investment in manufacturing industry will put a cap on the effective limit of any recovery that the Government can achieve. It will cap their ability to deal with the fundamental issue of unemployment.

I will not argue today that agreement to the proposal for capital allowances will bring back those rhythmic sounds that might help some of my constituents to sleep, but at least it might do something to bring back investment to manufacturing industry and that might help some of my constituents to find jobs.

Mr. Ken Purchase (Wolverhampton, North-East)

I rise to speak in support of the amendment and then to speak specifically about my area, the west midlands, and Wolverhampton in particular, which it would assist. I do not need to rehearse the arguments or review history again —it is plain to see. There has been a massive reduction in employment opportunities in the west midlands, where manufacturing has been hit particularly hard. My colleagues have reviewed many of the discussions and introduced the statistics that underlie and illustrate what we have been seeing in the United Kingdom, especially in the west midlands, in recent years.

If we adopt the amendment, we will send a signal to industry that the Government support a revival and reinvestment strategy for engineering and manufacturing production. In the meantime, it is not the perception of industry that the Government care what is happening to it. Therefore, the adoption of the amendment would send a good signal. 6.30 pm

In Wolverhampton and the black country, industry and housing have long lived cheek by jowl and, in recent years, steps have been taken to ease the tensions that frequently arise between two. The Environmental Protection Act 1990 places a duty on local authorities and companies to reduce and clean up emissions from their plants in urban areas and so prevent the pollution that has been such a problem for so many years.

We all support the view that emissions should be purified and pollution dealt with, but there are problems. Wolverhampton has many foundries, and I understand from the local authority that more than 140 of the processes used in them will require authorisation under the 1990 Act. Existing companies have been given time to introduce the changes, and that is helpful, but new companies have to meet the requirements from day one.

The Minister talked at some length about the need to encourage new starts and boasted of the Government's record in that regard, and we need not refer to the number of companies that have failed in the same period. It is important, however, that we recognise the difficulties that both new and existing companies—particularly in the foundry industry in my area—will experience as a result of the 1990 Act.

I remind hon. Members that it costs £900 simply to apply for authorisation. To some small companies, that is a great deal of money. One company in my area consists of just a couple of blokes with a process for brass-plating door furniture and other household goods. The cost of applying, and the cost of improving the quality of factory emissions, will place a great burden on such companies. The amendment would be of some help in the important process of improving the quality of industrial emissions in my area.

The metal melting industry also has considerable problems and would benefit from the amendment. It is expected that, for quite a small company, the capital outlay involved in complying with the new regulations will be up to £10,000. At a practical level, assistance with the work would be helpful. The Department of Trade and Industry is not over-helpful at present. No company seeking merely to meet the requirements of the 1990 Act qualifies for help, and the amendment would be of considerable assistance in solving that problem, especially as the cost to larger companies with a number of stacks is expected to be as high as £500,000.

Wolverhampton and the west midlands desperately need investment. They also need to comply with the new requirements. I ask the Minister to recognise the help that the amendment would give to many small companies—companies for which he professes concern in overcoming their difficulties in improving their processes, and in meeting the demands that are rightly to be made of them. Given what is happening elsewhere in the world—I am thinking of Brazil in particular—it is especially important that we recognise the need to meet such environmental standards. I repeat that the amendment would help many small companies in Wolverhampton and the west midlands to do that.

Mr. Dorrell

I could spend a long time on the point made by the hon. Member for Wolverhampton, North-East (Mr. Purchase), as I am familiar with the problems of foundries. One in my own constituency faced exactly the environmental problems that the hon. Gentleman described. His argument was not quite the same as that of most Opposition Members who spoke in support of the amendment moved by the hon. Member for Islington, South and Finsbury (Mr. Smith).

We have heard two maiden speeches. The first was from the hon. Member for Lewisham, West (Mr. Dowd), and I am grateful to him for the good wishes that he offered to John Maples. Conservative Members have good reason to be grateful to John because, during the general election, he was one of the most effective exponents of our case. He exposed the weakness of the shadow Cabinet's argument and helped to ensure that in the end, faced with the choice between the economic policy and Budget proposed by the right hon. and learned Member for Monklands, East (Mr. Smith) and the policies espoused by the Government, the electorate chose the latter. [HON. MEMBERS: "Except his constituents."] That is the great loss of the people of Lewisham, West and, as their new Member of Parliament was gracious enough to say, the House is confident in the expectation that John will soon be back here with us.

The hon. Member for Kingswood (Dr. Berry) also made his maiden speech, and I was grateful to him for what he said about Rob Hayward. The Boundary Commission is to continue its work during this Parliament and I am sure that Conservative Members, at least, will miss the expert advice that Rob gave us on the activities of the commission and their implications.

The hon. Member for Kingswood stressed the importance that he attached to manufacturing industry as the solution to the unemployment problem in his constituency, and it is that issue to which I shall now refer. I do not disagree with the proposition that manufacturing industry has a part to play in job creation and economic expansion, but it is only a partial role. The Opposition have argued that a special case should be made for manufacturing. I agree with the hon. Member for Berwick-upon-Tweed (Mr. Beith) that their arguments are simply not convincing.

The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) asked us to go back to, and to back, manufacturing. The Government have been accused of attaching inadequate importance to manufacturing and of being biased against it. I simply do not accept that any of those propositions is true. I do not need persuading of the importance of manufacturing or of the contribution that it can and does make to a buoyant economy. I came from a manufacturing background myself, and my family business is still involved in manufacturing. If I took seriously the strictures of the hon. Member for Bradford, South (Mr. Cryer), I might even have declared an interest in manufacturing at the beginning of my speech. I do, however, need persuading that the contribution that the manufacturing sector makes to the economy is better, more vital or more special than—or different from—the contribution that any other sector of the economy makes to economic output.

I will explain why I take that view. First, as my hon. Friend the Member for Beaconsfield (Mr. Smith) and the hon. Member for Berwick-upon-Tweed said, the definition of manufacturing as an economic activity is very arbitrary —so arbitrary, in fact, that two Opposition Members spent a significant part of their time espousing the causes of companies which were not even in the manufacturing sector. The hon. Member for Merthyr Tydfil and Rhymney asked why Peter Walker deemed it desirable to shift people from mining into banking. Neither of those activities is manufacturing. The hon. Member for Lewisham, West spoke about his former employment in British Telecom. The vast bulk of BT's activities are not manufacturing.

Mr. Dowd

I said that I started with the GPO 25 years ago. That was where I was trained. I subsequently spent 25 years with Plessey which is now GEC-Plessey Telecoms. I did not work for British Telecom.

Mr. Dorrell

The hon. Gentleman was also at pains to say that he worked in British Telecom in the days when there was none of the "privatisation nonsense". As one of my colleagues remarked, in those days people had to wait four months for a telephone.

I am trying to remind the House that the definition of manufacturing is relatively arbitrary. As my hon. Friend the Member for Beaconsfield explained, when Mars moved its distribution activity from in-house and subcontracted it to a third party, that moved activity—entirely arbitrarily—out of manufacturing into the distribution and, therefore, the service sector.

Mr. Rowlands

The Minister is labouring the point. However, the Government support selective financial assistance with great enthusiasm. In communities such as mine, the SFA is defined in terms of manufacture investment. The Minister should not stress the point too much or he will undermine one of the central points and policies which has been supported by successive Secretaries of State for Wales.

Mr. Dorrell

The hon. Gentleman will find it difficult to establish a split on that subject. It is important that all economic activity is desirable. Manufacturing, although desirable, is no more or less desirable than other forms of economic activity.

The suggestion that the Government are uncommitted to manufacturing because it has been declining as a share of our total economic activity over many years, including under Labour Governments, does not stand up. As my hon. Friend the Member for Beaconsfield rightly said, the share of manufacturing in total economic activity is declining in all developed economies, partly because of the point about definition that I have made, and partly because when consumers have marginal income available to them they spend it disproportionately on other activities rather than on the purchase of goods. That leads to an expansion of other activities within a free economy.

I do not find attractive the particular method of promoting manufacturing espoused by the hon. Member for Islington, South and Finsbury. The House should concentrate for a second on the fact that the amendment would not even channel capital allowances to the totality of manufacturing industry. The flow would be to those parts of manufacturing activity designated by order. The amendment seems to imply that Labour believes that it is desirable that capital allowances should be available to sectors defined by order by politicians. That seems to me to be the least desirable kind of capital allowance.

Mr. Robert Sheldon (Ashton-under-Lyne)

I was disappointed to hear the Minister refer to manufacturing industry as though it were equivalent to any other part of our economy. Nigel Lawson made that point early in his period as Chancellor of the Exchequer, but then seemed to withdraw from it. I am disappointed to see the idea resurrected. Clearly the most important aspect of manufacturing industry is that it is responsible for most of our exports. Japan and Germany are more successful than the United States and Britain because of the development of their manufacturing industries. We have not heard such comments from a Minister since they were made by Nigel Lawson some years ago.

Mr. Dorrell

The export record of British manufacturing industry is substantially more successful than most observers often recognise. Our share of world trade in manufactures is estimated to have risen in 1991 for the third year running. I am not trying to belittle the importance of manufacturing. At the beginning of my remarks, I stressed that I come from a manufacturing background and I represent a constituency where a substantial proportion of people are employed in manufacturing. However, I do not support the assertion, which is the necessary consequence of arguing that manufacturing is more important, that those employed in distribution, banking, services or mining and primary production are less important than those involved in manufacturing. I do not believe that that is true.

Whether or not we accept that manufacturing is separate, special and should be particularly assisted, there is the wider question whether capital allowances are a desirable way of promoting investment in manufacturing industry specifically or in the generality of industry.

6.45 pm

My right hon. Friend the Chancellor of the Exchequer made it clear in his Budget speech that the Government had reconsidered that point again very recently. All the considerations of issues in the run-up to the Budget are supposed to take place in total secrecy. However, in the interests of open government my right hon. Friend the Chancellor drew the veil aside slightly on Budget secrecy in his speech when he said: I have considered this proposition very carefully. I would be as concerned as anyone if I thought that the corporation tax system introduced in 1984 was acting as a drag on profitable investment … The evidence suggests that the cost of higher capital allowances to the Exchequer would be several times greater than the resulting increase in investment over the next few years. I have therefore concluded that, whatever its superficial attractions, an increase in capital allowances would not be a sensible use of the resources available."—[Official Report, 10 March 1992; Vol. 205, c. 750.] My right hon. Friend the Chancellor considered the point carefully and recently, and concluded that it was not a sensible use of resources". It is legitimate to ask why he reached that conclusion.

Mr. Chris Smith

The Financial Secretary to the Treasury must realise that studies undertaken by the Institute of Fiscal Studies and Keele university, both of which I tend to believe rather more than I believe the Chancellor of the Exchequer, find to the contrary. The cost of introducing capital allowances would be far outmatched by the benefit in terms of investment which would then take place.

Mr. Dorrell

That point may be espoused by Keele university, but it is not espoused by the Government. Before I was interrupted, I was about to explain why we reached the conclusion that we did. I suspect that my right hon. Friend the Chancellor reached the conclusion that he did because he looked at the evidence. He found that if we consider the record of business investment over the past 15 years and compare the investment records of British business under the regime espoused by the Labour party and put in place by Labour during the five years of the 1974 Parliament with the five years of the 1987 Parliament, it is clear that the average rate of investment over the five years of the 1987 Parliament was 52 per cent. higher in real terms than under the regime espoused by the Labour party. I am not trying to dissemble between different types of investment. Manufacturing investment was 15 per cent. higher in the 1987 Parliament than it was in the 1974 Parliament. The facts do not support the assertion that capital allowances increase the flow of investment in the way argued by the Labour party.

If we compare the profitability of British industry now with earlier years, not only has investment continued to flow quickly into the business sector under this Government: the profitability of British business is also significantly higher. That is important for two reasons. First, it signifies that the investment is better and higher quality investment, delivering a better economic return. Secondly, it is important for the reason made clear by my hon. Friend the Member for Beaconsfield—that the largest single source of capital to finance investment is retained profits. If we want investment to expand, one of the best ways to deliver that is to improve the rate of profitability so that business has more money available to use for that desirable investment.

Mr. Sheldon

I apologise for intervening again, but I read with some care the passage from the Chancellor's speech that the Minister has quoted. The Chancellor had obviously considered the matter and, as a result, I am sure that the House took note of it. However, he was referring to capital allowances generally, not to manufacturing capital allowances or plant and machinery. Those are the areas about which we should be concerned. If the Minister considered that more limited area, he would find the arithmetic rather different.

Mr. Dorrell

I made it clear that I had moved on from the speciality of manufacturing to the general matter of capital allowances. For the reasons that I stated earlier, I do not accept the proposition that we should seek to bias the tax system in favour of manufacturing. I was then considering the wider matter of whether capital allowances were a sensible proposition in themselves, and I concluded that they were not.

The amendment relates to the wrong issue. It would aim to generate an investment-led recovery, but history has shown time and again that investment-led recoveries are chimeras. Investment decisions by business should not be led by political considerations as to how to get a tax relief. Investment decisions should be the result of the assessment by business men themselves of the sales prospects and productivity gains which will deliver profits to business and economic strength to the community.

The statistics show clearly that the regime that we have espoused has delivered not only more investment, but higher profitability of investment, and therefore the creation of a virtual circle which will deliver an expanding economy capable of financing further investment for the future and, most important of all, the expanding job opportunities that hon. Members rightly want as the result of a successful economy. I do not believe that the Opposition have made their case.

Mr. Boateng

This is the first of our Committee debates on the Finance Bill. I suspect that it will be one of our shortest debates, because Opposition Members intend to fight the Bill with all the vigour that we possess, and to fight it when necessary late into the night. We possess great vigour.

The debate takes place against a background of the most abject failure of manufacturing industry under the stewardship of the Conservatives. For example, 562,000 jobs have been lost in the manufacturing sector during this recession alone. According to the CBI, employment in manufacturing is forecast to fall by 143,000 between the first and fourth quarters of this year and by 214,000 by the end of 1993. No other country in the European Community has seen such a dramatic fall in manufacturing employment since 1979.

The speech of the hon. Member for Beaconsfield (Mr. Smith) was redolent with memory for hon. Members who have heard his speeches on previous Finance Bills.

Mr. Tim Smith

It was the same speech.

Mr. Boateng

Yes, it was the same speech, almost—we had a copy of the hon. Gentleman's contribution last year. We were told by him, "Never mind the quantity of investment, think only of the quality." I am bound to say that the contributions by Conservative Members—all three of them—were lacking in both respects.

In respect of the quality and quantity of Opposition Members' speeches, we could not have hoped for better. One by one my hon. Friends the Members for Merthyr Tydfil and Rhymney (Mr. Rowlands), for Lewisham, West (Mr. Dowd), for Hartlepool (Mr. Mandelson), for Kingswood (Dr. Berry), for Darlington (Mr. Milburn), for Sheffield, Attercliffe (Mr. Betts) and for Wolverhampton, North-East (Mr. Purchase) spoke, and one by one they impressed by their knowledge and command of the subject. I would not do justice to their contributions if I did not pay particular regard to the maiden speeches by my hon. Friends the Members for Wolverhampton, North-East and for Kingswood.

Mr. Patrick Cormack (Staffordshire, South)

What about my hon. Friend the Member for Newbury (Mrs. Chaplin)?

Mr. Boateng

The hon. Member for Newbury is not present, but she made a useful contribution. We agree with her on one point at least—the sooner Greenham common is returned to its true purpose, the better it will be. [Interruption.] Yes, the enjoyment of the common land by the ordinary people of that neighbourhood. We hope to celebrate that early return.

It is useful to consider the amendment and Conservative Members' responses to it. We have brought forward a modest amendment—it is not outrageous and it should not offend those who are concerned about the health of our manufacturing industry—in a constructive spirit. We found support for the amendment from the CBI, engineering employers and the Trades Union Congress. They recognise the extent of the manufacturing crisis. They recognise, although it appears that the Government do not, the depth of the recession.

Only yesterday, Government spin doctors were at work in no less a journal than the Evening Standard. [Interruption.] All right, it is hardly a journal of record, I grant hon. Members, but at least it is the authentic voice of the modern Conservative party. What does the authentic voice of the modern Conservative party have to say about the recession. It says: The Chancellor is still convinced the recovery will become firmly established this year. We have heard that before. Then it trots out some of the usual suspects for the cause of the recession and for the non-appearance of the recovery. We have heard many of them before, so I need mention them only in passing. They include a lack of consumer confidence. We were told, of course, that consumer confidence would suddenly revive the minute the Tories won the election. No such thing happened, of course. However, that point was trotted out. Interestingly, we are told that Weaker energy output caused by maintenance work in the North Sea is apparently a cause of the failure of the recovery to come on tap. The third reason, which is the most unusual of them all, is the "unseasonally good weather."

Apparently, according to the Evening Standard and the spin doctors at the Treasury, some of whom may be writhing as I speak, the "unseasonally good weather" has a hand in the poor performance in the first quarter. We need to explore how the "unseasonally good weather" acounts for that poor performance and, more important and more interesting, what the Government will do about it.

We have a hint from the Government's performance this afternoon. We have heard the rain-dancers of the Conservative party at work. I use the term "rain-dancers" advisedly. We have seen a variety of ritual movements and ritual incantations of the same old nostrums that those of us who have had to listen to them have heard year in and year out—the same old nostrums of Conservative market philosophy that have proved to be absolutely redundant and incapable of promoting the recovery that we seek. We have brought forward the amendment in the hope that the rain-dancers will recognise that, if they continue those incantations, vapid and vacuous movements and statements, they cannot hope to be the flower in the desert that they themselves have created.

The case for capital allowances is unanswerable, and the Government have not answered it. It is built on a desire to begin to counteract the devastation that has occurred in the manufacturing sector. We take no comfort from any notion that, somehow, the development of the financial services industry is not to be welcomed—we welcome it. If we are creating a strong economy, we need a balance between financial services and manufacturing. But, as was pointed out in the debate, not least by my hon. Friends the Members for Kingswood and for Lewisham, West, if one neglects manufacturing and believes simply that financial services alone can form the basis of a sound economy, one lives in cloud cuckoo land.

Since the news was put out that the plug was to be pulled on Olympia and York at Canary Wharf, GEC has announced a cut of more than 800 jobs in Chelmsford in Essex on top of the 5,000 jobs lost in the company last year. The Commercial Vehicle company has announced that it is to go into receivership. Harking back again to the points made by my hon. Friend the Member for Kingswood, British Aerospace has lost up to 640 jobs. Belling has gone into receivership, with the loss of 850 jobs in Enfield and a further 200 jobs in Burnley in Lancashire.

7 pm

In this afternoon's debate we have heard speeches from those who have been engaged in promoting business in north Tyneside. They are not engaged in an academic exercise but are encouraging the development of business there. We heard from those involved in promoting co-operative industry in the midlands. Again, that is not abstract or esoteric; it is the practical experience of those men and women who are involved in building a strong manufacturing economy.

We stand four square alongside those men and women and with the tide of history that says that manufacturing is important, that there is something important about the rhythm of creating, manufacturing and producing goods. We make no apology for that. The bell tolls for those on the Conservative Benches who constantly seek to undermine the strength of our manufacturing industry. Our amendment will carry the day. It holds the best hope for the future of our economy and I commend it to the Committee.

Question put, That the amendment be made:—

The Committee divided: Ayes 231, Noes 329.

Division No. 28] [7.2 pm
Adams, Mrs Irene Cryer, Bob
Ainger, Nicholas Cummings, John
Ainsworth, Robert (Cov'try NE) Cunliffe, Lawrence
Allen, Graham Cunningham, Jim (Covy SE)
Anderson, Donald (Swansea E) Cunningham, Dr John (C'p'l'nd)
Anderson, Ms Janet (Ros'dale) Dafis, Cynog
Armstrong, Hilary Dalyell, Tam
Ashton, Joe Darling, Alistair
Austin-Walker, John Davies, Bryan (Oldham C'tral)
Banks, Tony (Newham NW) Davies, Ron (Caerphilly)
Barnes, Harry Davis, Terry (B'ham, H'dge H'l)
Battle, John Denham, John
Bayley, Hugh Dixon, Don
Beckett, Margaret Dobson, Frank
Bell, Stuart Donohoe, Brian
Benn, Rt Hon Tony Dowd, Jim
Bennett, Andrew F. Dunnachie, Jimmy
Benton, Joe Dunwoody, Mrs Gwyneth
Bermingham, Gerald Eagle, Ms Angela
Berry, Roger Enright, Derek
Betts, Clive Etherington, William
Blair, Tony Evans, John (St Helens N)
Boateng, Paul Ewing, Mrs Margaret
Boyce, Jimmy Fatchett, Derek
Boyes, Roland Faulds, Andrew
Bradley, Keith Field, Frank (Birkenhead)
Brown, Gordon (Dunfermline E) Fisher, Mark
Brown, N. (N'c'tle upon Tyne E) Flynn, Paul
Burden, Richard Foster, Derek (B'p Auckland)
Byers, Stephen Foulkes, George
Caborn, Richard Fraser, John
Callaghan, Jim Fyfe, Maria
Campbell, Ms Anne (C'bridge) Galbraith, Sam
Campbell, Ronald (Blyth V) Galloway, George
Campbell-Savours, D. N. Gapes, Michael
Cann, James George, Bruce
Chisholm, Malcolm Gerrard, Neil
Clapham, Michael Gilbert, Rt Hon Dr John
Clark, Dr David (South Shields) Godman, Dr Norman A.
Clarke, Eric (Midlothian) Godsiff, Roger
Clarke, Tom (Monklands W) Golding, Mrs Llin
Clelland, David Gordon, Mildred
Coffey, Ms Ann Graham, Thomas
Cohen, Harry Grant, Bernie (Tottenham)
Connarty, Michael Griffiths, Nigel (Edinburgh S)
Cook, Frank (Stockton N) Griffiths, Win (Bridgend)
Cook, Robin (Livingston) Gunnell, John
Corston, Ms Jean Hain, Peter
Cousins, Jim Hall, Mike
Cox, Tom Hanson, David
Harman, Ms Harriet Oakes, Rt Hon Gordon
Henderson, Doug O'Brien, Michael (N W'kshire)
Heppell, John O'Brien, William (Normanton)
Hill, Keith (Streatham) O'Hara, Edward
Hinchliffe, David Olner, William
Hoey, Kate O'Neill, Martin
Hogg, Norman (Cumbernauld) Patchett, Terry
Home Robertson, John Pendry, Tom
Hood, Jimmy Pickthall, Colin
Howarth, George (Knowsley N) Pike, Peter L.
Hoyle, Doug Pope, Greg
Hughes, Kevin (Doncaster N) Powell, Ray (Ogmore)
Hughes, Robert (Aberdeen N) Prentice, Ms Bridget (Lew'm E)
Hughes, Roy (Newport E) Prentice, Gordon (Pendle)
Hutton, John Primarolo, Dawn
Illsley, Eric Purchase, Ken
Ingram, Adam Quin, Ms Joyce
Jackson, Ms Glenda (H'stead) Radice, Giles
Jackson, Ms Helen (Shef'ld, H) Raynsford, Nick
Janner, Greville Redmond, Martin
Jones, Barry (Alyn and D'side) Reid, Dr John
Jones, Ieuan (Ynys Môn) Richardson, Jo
Jones, Jon Owen (Cardiff C) Robinson, Geoffrey (Co'try NW)
Jones, Ms Lynne (B'ham S O) Roche, Ms Barbara
Jones, Martyn (Clwyd, SW) Rogers, Allan
Jowell, Ms Tessa Rooker, Jeff
Kaufman, Rt Hon Gerald Rooney, Terry
Keen, Alan Ross, Ernie (Dundee W)
Kennedy, Ms Jane (L'p'l Br'g'n) Rowlands, Ted
Khabra, Piara Ruddock, Joan
Kilfoyle, Peter Salmond, Alex
Lestor, Joan (Eccles) Sheerman, Barry
Lewis, Terry Sheldon, Rt Hon Robert
Litherland, Robert Shore, Rt Hon Peter
Livingstone, Ken Short, Clare
Lloyd, Tony (Stretford) Skinner, Dennis
Loyden, Eddie Smith, Andrew (Oxford E)
McCartney, Ian Smith, C. (Isl'ton S & F'sbury)
McFall, John Smith, Rt Hon John (M'kl'ds E)
McKelvey, William Snape, Peter
Mackinlay, Andrew Spearing, Nigel
McLeish, Henry Squire, Rachel (Dunfermline W)
McMaster, Gordon Steinberg, Gerry
McNamara, Kevin Strang, Gavin
Madden, Max Straw, Jack
Mahon, Alice Taylor, Mrs Ann (Dewsbury)
Mallon, Seamus Thompson, Jack (Wansbeck)
Mandelson, Peter Tipping, Paddy
Marek, Dr John Turner, Dennis
Marshall, David (Shettleston) Vaz, Keith
Marshall, Jim (Leicester, S) Walker, Rt Hon Sir Harold
Martlew, Eric Walley, Joan
Maxton, John Wardell, Gareth (Gower)
Meacher, Michael Watson, Mike
Meale, Alan Wicks, Malcolm
Michael, Alun Williams, Rt Hon Alan (Sw'n W)
Michie, Bill (Sheffield Heeley) Williams, Alan W (Carmarthen)
Milburn, Alan Wilson, Brian
Miller, Andrew Winnick, David
Mitchell, Austin (Gt Grimsby) Wise, Audrey
Moonie, Dr Lewis Worthington, Tony
Morley, Elliot Wray, Jimmy
Morris, Rt Hon A. (Wy'nshawe) Wright, Tony
Morris, Estelle (B'ham Yardley)
Morris, Rt Hon J. (Aberavon) Tellers for the Ayes:
Mudie, George Mr. Robert N. Wareing and
Mullin, Chris Mr. Ken Eastham.
Murphy, Paul
Adley, Robert Arnold, Sir Thomas (Hazel Grv)
Ainsworth, Peter (East Surrey) Ashby, David
Aitken, Jonathan Ashdown, Rt Hon Paddy
Alexander, Richard Aspinwall, Jack
Alison, Rt Hon Michael (Selby) Atkinson, Peter (Hexham)
Allason, Rupert (Torbay) Baker, Rt Hon K. (Mole Valley)
Amess, David Baker, Nicholas (Dorset North)
Ancram, Michael Baldry, Tony
Arbuthnot, James Banks, Matthew (Southport)
Arnold, Jacques (Gravesham) Banks, Robert (Harrogate)
Bates, Michael Forman, Nigel
Batiste, Spencer Forsyth, Michael (Stirling)
Beggs, Roy Forth, Eric
Beith, A. J. Foster, Donald (Bath)
Bellingham, Henry Fox, Dr Liam (Woodspring)
Bendall, Vivian Freeman, Roger
Beresford, Sir Paul French, Douglas
Biffen, Rt Hon John Fry, Peter
Blackburn, Dr John G. Gale, Roger
Body, Sir Richard Gallie, Phil
Bonsor, Sir Nicholas Gardiner, Sir George
Booth, Hartley Garnier, Edward
Boswell, Tim Gill, Christopher
Bottomley, Peter (Eltham) Goodlad, Rt Hon Alastair
Bottomley, Rt Hon Virginia Goodson-Wickes, Dr Charles
Bowden, Andrew Gorman, Mrs Teresa
Bowis, John Gorst, John
Boyson, Rt Hon Sir Rhodes Grant, Sir Anthony (Cambs SW)
Brandreth, Gyles Greenway, Harry (Ealing N)
Brazier, Julian Greenway, John (Ryedale)
Bright, Graham Griffiths, Peter (Portsmouth, N)
Brooke, Rt Hon Peter Grylls, Sir Michael
Brown, M. (Brigg & Cl'thorpes) Gummer, Rt Hon John Selwyn
Browning, Mrs. Angela Hague, William
Bruce, Ian (S Dorset) Hamilton, Rt Hon Archie
Bruce, Malcolm (Gordon) Hamilton, Neil (Tatton)
Burns, Simon Hampson, Dr Keith
Burt, Alistair Hanley, Jeremy
Butcher, John Hannam, Sir John
Butler, Peter Hargreaves, Andrew
Butterfill, John Harris, David
Campbell, Menzies (Fife NE) Harvey, Nick
Carrington, Matthew Haselhurst, Alan
Carttiss, Michael Hawkins, Nicholas
Cash, William Hawksley, Warren
Channon, Rt Hon Paul Heald, Oliver
Chaplin, Mrs Judith Heathcoat-Amory, David
Churchill, Mr Hendry, Charles
Clappison, James Heseltine, Rt Hon Michael
Clark, Dr Michael (Rochford) Hicks, Robert
Clifton-Brown, Geoffrey Hill, James (Southampton Test)
Coe, Sebastian Hogg, Rt Hon Douglas (G'tham)
Colvin, Michael Horam, John
Congdon, David Hordern, Sir Peter
Conway, Derek Howarth, Alan (Strat'rd-on-A)
Coombs, Anthony (Wyre For'st) Howell, Ralph (North Norfolk)
Coombs, Simon (Swindon) Hughes Robert G. (Harrow W)
Cope, Rt Hon Sir John Hughes, Simon (Southwark)
Cormack, Patrick Hunt, Rt Hon David (Wirral W)
Couchman, James Hunt, Sir John (Ravensbourne)
Cran, James Hunter, Andrew
Currie, Mrs Edwina (S D'by'ire) Jackson, Robert (Wantage)
Curry, David (Skipton & Ripon) Jenkin, Bernard
Davies, Quentin (Stamford) Jessel, Toby
Davis, David (Boothferry) Johnson Smith, Sir Geoffrey
Day, Stephen Johnston, Sir Russell
Devlin, Tim Jones, Gwilym (Cardiff N)
Dickens, Geoffrey Jones, Nigel (Cheltenham)
Dicks, Terry Jones, Robert B. (W H'f'rdshire)
Dorrell, Stephen Jopling, Rt Hon Michael
Douglas-Hamilton, Lord James Kellett-Bowman, Dame Elaine
Dover, Den Key, Robert
Duncan, Alan Kilfedder, James
Duncan-Smith, Iain King, Rt Hon Tom
Dunn, Bob Kirkhope, Timothy
Durant, Sir Anthony Kirkwood, Archy
Eggar, Tim Knapman, Roger
Elletson, Harold Knight, Mrs Angela (Erewash)
Emery, Sir Peter Knight, Greg (Derby N)
Evans, David (Welwyn Hatfield) Knight, Dame Jill (Bir'm E'st'n)
Evans, Jonathan (Brecon) Knox, David
Evans, Nigel (Ribble Valley) Kynoch, George (Kincardine)
Evans, Roger (Monmouth) Lait, Mrs Jacqui
Evennett, David Lamont, Rt Hon Norman
Faber, David Lang, Rt Hon Ian
Fabricant, Michael Lawrence, Ivan
Fairbairn, Sir Nicholas Legg, Barry
Fenner, Dame Peggy Leigh, Edward
Field, Barry (Isle of Wight) Lennox-Boyd, Hon Mark
Fishburn, John Dudley Lester, Jim (Broxtowe)
Lidington, David Sainsbury, Rt Hon Tim
Lilley, Rt Hon Peter Scott, Rt Hon Nicholas
Lloyd, Peter (Fareham) Shaw, David (Dover)
Lord, Michael Shephard, Rt Hon Gillian
Luff, Peter Shepherd, Colin (Hereford)
Lynne, Ms Liz Shepherd, Richard (Aldridge)
MacGregor, Rt Hon John Sims, Roger
MacKay, Andrew Skeet, Sir Trevor
Maclean, David Smith, Sir Dudley (Warwick)
McLoughlin, Patrick Smith, Tim (Beaconsfield)
McNair-Wilson, Sir Patrick Soames, Nicholas
Madel, David Speed, Keith
Maginnis, Ken Spencer, Sir Derek
Maitland, Lady Olga Spicer, Sir James (W Dorset)
Malone, Gerald Spicer, Michael (S Worcs)
Mans, Keith Spink, Dr Robert
Marland, Paul Spring, Richard
Marlow, Tony Sproat, Iain
Marshall, John (Hendon S) Squire, Robin (Hornchurch)
Marshall, Sir Michael (Arundel) Stanley, Rt Hon Sir John
Martin, David (Portsmouth S) Steel, Rt Hon Sir David
Mates, Michael Stephen, Michael
Mawhinney, Dr Brian Stern, Michael
Mayhew, Rt Hon Sir Patrick Stewart, Allan
Mellor, Rt Hon David Streeter, Gary
Merchant, Piers Sumberg, David
Michie, Mrs Ray (Argyll Bute) Sykes, John
Milligan, Stephen Tapsell, Sir Peter
Mills, Iain Taylor, Ian (Esher)
Mitchell, Andrew (Gedling) Taylor, Rt Hon D. (Strangford)
Mitchell, Sir David (Hants NW) Taylor, John M. (Solihull)
Moate, Roger Taylor, Matthew (Truro)
Molyneaux, Rt Hon James Taylor, Sir Teddy (Southend, E)
Monro, Sir Hector Thomason, Roy
Montgomery, Sir Fergus Thompson, Sir Donald (C'er V)
Moss, Malcolm Thompson, Patrick (Norwich N)
Needham, Richard Thornton, Malcolm
Nelson, Anthony Thurnham, Peter
Neubert, Sir Michael Townend, John (Bridlington)
Newton, Rt Hon Tony Townsend, Cyril D. (Bexl'yh'th)
Nicholls, Patrick Tracey, Richard
Nicholson, David (Taunton) Tredinnick, David
Nicholson, Emma (Devon West) Trend, Michael
Norris, Steve Trimble, David
Onslow, Rt Hon Cranley Trotter, Neville
Oppenheim, Phillip Twinn, Dr Ian
Ottaway, Richard Tyler, Paul
Page, Richard Vaughan, Sir Gerard
Paice, James Viggers, Peter
Paisley, Rev Ian Waldegrave, Rt Hon William
Patnick, Irvine Walden, George
Patten, Rt Hon John Walker, A. Cecil (Belfast N)
Pattie, Rt Hon Sir Geoffrey Walker, Bill (N Tayside)
Pawsey, James Wallace, James
Peacock, Mrs Elizabeth Waller, Gary
Pickles, Eric Ward, John
Porter, Barry (Wirral S) Wardle, Charles (Bexhill)
Porter, David (Waveney) Waterson, Nigel
Portillo, Rt Hon Michael Watts, John
Powell, William (Corby) Wells, Bowen
Rathbone, Tim Wheeler, Sir John
Redwood, John Whittingdale, John
Renton, Rt Hon Tim Widdecombe, Ann
Richards, Rod Wiggin, Jerry
Riddick, Graham Wilkinson, John
Rifkind, Rt Hon. Malcolm Willetts, David
Robathan, Andrew Winterton, Mrs Ann (Congleton)
Roberts, Rt Hon Sir Wyn Winterton, Nicholas (Macc'f'ld)
Robertson, Raymond (Ab'd'n S) Wolfson, Mark
Robinson, Mark (Somerton) Wood, Timothy
Roe, Mrs Marion (Broxbourne) Yeo, Tim
Ross, William (E Londonderry) Young, Sir George (Acton)
Rowe, Andrew (Mid Kent)
Rumbold, Rt Hon Dame Angela Tellers for the Noes:
Ryder, Rt Hon Richard Mr. Sydney Chapman and
Sackville, Tom Mr. David Lightbown.

Question accordingly negatived.

Mr. Beith

I beg to move amendment No. 1, in page 12, line 47, at end add `and shall have effect as if there had been added to section 25(1)(b) of the Capital Allowances Act 1990 after "thereto" the words The balance so arrived at shall be up-rated by the rate of inflation for the chargeable period, as given by the gross domestic product deflator, in respect of any chargeable period beginning on or after 1st April 1992".'.

I shall be brief, because I do not share the ambition of the hon. Member for Brent, South (Mr. Boateng) to fight the Bill line by line, tooth and nail. It does not justify that, and the hon. Gentleman will have some difficulty identifying more than half-a-dozen clauses to which anyone could take strong exception. It is just not that kind of Bill. Other legislation might justify that sort of treatment, but not this.

The amendment suggests a sensible way of changing corporation tax arrangements to protect companies from inflation adding to their corporation tax burden. Providing a long-term, stable corporation tax framework is more likely to provide the climate for investment than one-off incentives designed to promote manufacturing investment in a particular year. I hope that the Government share our objective, even if they feel unable to agree to the amendment.

The present tax system—certainly corporation tax—is distorted by inflation. When the Government's inflation policy goes wrong, business is hit not only by higher prices and higher interest rates but by a higher real corporation tax burden. That distortion can itself lead to lower investment.

The most pernicious aspect relates to investment allowances. Companies can only write down a machine's historic cost, not its current cost, which creates a disincentive to invest. Removing that distortion would be a simple and sound long-term reform of greater value than one-year investment of the kind that the Committee has rightly just voted against, by a substantial majority.

With the Chancellor of the Exchequer in his place, the Financial Secretary might feel obliged to argue that there will not be any inflation, because the Government will remove that scourge from the economy. Even the Chancellor has taken to talking about not the zero inflation rate which the Prime Minister repeatedly mentioned, but a target of 2 per cent. Some have even criticised him for setting so ambitious a target, with the downside that it has in terms of some of the more uncomfortable disciplines associated with it. I share his desire to set a firm target, and would be inclined to go for the zero target rather than for 2 per cent.

Industry has been down this road before when it was told that it could make reforms because there would be no inflation. Nigel Lawson thought and said that in 1984, but inflation took off after reforms led to the removal of the stock allowances. Business was penalised twice as a consequence of inflation.

It would be more sensible to introduce this reform when inflation is low because that would reduce its cost. Its introduction now would also show that the Government are determined to keep inflation low. If inflation rose, the cost of that reform would increase. It therefore makes a great deal of sense to make the change now.

The corporation tax system is vulnerable to distortion in other ways because there is no stock relief, and because nominal rather than real interest rates are deductible. We simply propose one change in the way in which inflation is accounted for in that system. It is a modest change, which would provide more stability for business and encourage more investment decisions to be made on the right grounds rather than because they would incur one-year tax relief. Those decisions would be made because they represented good economic, business sense. I commend the amendment to the Committee.

Mr. Dorrell

The hon. Member for Berwick-upon-Tweed (Mr. Beith) described the amendment as a modest measure and that is a fair description. I shall make a brief reply, and I am afraid that I shall not suggest to the House that we accept the amendment.

The amendment would adjust capital allowances to allow for inflation, presumably on the ground that the current write-down allowance for tax understates the true cost of using the asset. That is not true because, as I quoted earlier, my right hon. Friend the Chancellor said in the Budget statement: on average, the current tax rules allow capital investment to be written off more quickly than economic depreciation would imply".—[Official Report, 10 March 1992; Vol. 205, c. 750.] The 25 per cent. write-off allowance already allows for inflation, plus a bit more. The hon. Gentleman's assumption is wrong.

There is another reason why this would not be a desirable amendment. I refer to the hon. Gentleman's confidence, or lack of it, that inflation will be brought under control. I am not sensitive about it and I simply remind him that our monetary policy is now set in the context for which the Liberal party argued for many years on the ground that it would be a more successful counter-inflation policy. The pound is in the exchange rate mechanism and we share the hon. Gentleman's confidence that his policy will deliver low inflation. The amendment will, therefore, he unnecessary.

Mr. Beith

I am unconvinced and I believe that i f the Government anticipate a successful anti-inflation policy, they should recognise the reasonable cost of the amendment. Business is dissatisfied with the extent of the write-down allowances and it does not feel that the present system adequately allows for inflation. I therefore invite the Committee to make a sensible change to the corporation tax system.

Question put, That the amendment be made:—

The Committee divided: Ayes 125, Noes 291.

Division No. 29] [7.23 pm
Ainger, Nicholas Callaghan, Jim
Ainsworth, Robert (Cov'try NE) Campbell, Ms Anne (C'bridge)
Allen, Graham Campbell, Menzies (Fife NE)
Anderson, Donald (Swansea E) Campbell-Savours, D. N.
Ashton, Joe Chisholm, Malcolm
Banks, Tony (Newham NW) Cohen, Harry
Barnes, Harry Corbyn, Jeremy
Battle, John Cousins, Jim
Beckett, Margaret Cox, Tom
Beggs, Roy Cryer, Bob
Benn, Rt Hon Tony Cummings, John
Bennett, Andrew F Cunliffe, Lawrence
Benton, Joe Cunningham, Jim (Covy SE)
Betts, Clive Dafis, Cynog
Boyce, Jimmy Darling, Alistair
Boyes, Roland Davies, Bryan (Oldham C'tral)
Bradley, Keith Davis, Terry (B'ham, H'dge H'l)
Brown, N. (N'c'tle upon Tyne E) Dixon, Don
Bruce, Malcolm (Gordon) Dunwoody, Mrs Gwyneth
Enright, Derek Mandelson, Peter
Ewing, Mrs Margaret Marek, Dr John
Fatchett, Derek Marshall, David (Shettleston)
Flynn, Paul Marshall, Jim (Leicester, S)
Foster, Donald (Bath) Martlew, Eric
Gilbert, Rt Hon Dr John Meale, Alan
Godman, Dr Norman A. Michie, Mrs Ray (Argyll Bute)
Godsiff, Roger Milburn, Alan
Golding, Mrs Llin Miller, Andrew
Graham, Thomas Molyneaux, Rt Hon James
Griffiths, Nigel (Edinburgh S) Morley, Elliot
Griffiths, Win (Bridgend) Morris, Rt Hon A. (Wy'nshawe)
Gunnell, John Morris, Estelle (B'ham Yardley)
Hall, Mike Mudie, George
Harvey, Nick O'Brien, William (Normanton)
Hendron, Dr Joe Paisley, Rev Ian
Heppell, John Pickthall, Colin
Hinchliffe, David Prentice, Ms Bridget (Lew'm E)
Hogg, Norman (Cumbernauld) Radice, Giles
Howarth, George (Knowsley N) Robinson, Geoffrey (Co'try NW)
Hoyle, Doug Roche, Ms Barbara
Hughes, Roy (Newport E) Rooker, Jeff
Hughes, Simon (Southwark) Ross, William (E Londonderry)
Hutton, John Salmond, Alex
Illsley, Eric Simpson, Alan
Jackson, Ms Helen (Shef'ld, H) Skinner, Dennis
Janner, Greville Spearing, Nigel
Johnston, Sir Russell Steel, Rt Hon Sir David
Jones, Barry (Alyn and D'side) Steinberg, Gerry
Jones, Ieuan (Ynys Môn) Strang, Gavin
Jones, Ms Lynne (B'ham S O) Taylor, Rt Hon D. (Strangford)
Jones, Martyn (Clwyd, SW) Taylor, Matthew (Truro)
Jones, Nigel (Cheltenham) Trimble, David
Kennedy, Charles (Ross, C & S) Walker, A. Cecil (Belfast N)
Kennedy, Ms Jane (L'p'l Br'g'n) Wallace, James
Khabra, Piara Wardell, Gareth (Gower)
Kirkwood, Archy Wareing, Robert N
Loyden, Eddie Wicks, Malcolm
Lynne, Ms Liz Winnick, David
McKelvey, William Wise, Audrey
McLeish, Henry Wright, Tony
McMaster, Gordon
Madden, Max Tellers for the Ayes:
Maginnis, Ken Mr. A. J. Beith and
Mahon, Alice Mr. Paul Tyler.
Mallon, Seamus
Adley, Robert Boyson, Rt Hon Sir Rhodes
Ainsworth, Peter (East Surrey) Brandreth, Gyles
Aitken, Jonathan Brazier, Julian
Alexander, Richard Bright, Graham
Alison, Rt Hon Michael (Selby) Brooke, Rt Hon Peter
Allason, Rupert (Torbay) Brown, M. (Brigg & Cl'thorpes)
Amess, David Browning, Mrs. Angela
Ancram, Michael Bruce, Ian (S Dorset)
Arbuthnot, James Burns, Simon
Arnold, Jacques (Gravesham) Burt, Alistair
Arnold, Sir Thomas (Hazel Grv) Butcher, John
Ashby, David Butler, Peter
Aspinwall, Jack Butterfill, John
Atkinson, Peter (Hexham) Carrington, Matthew
Baker, Rt Hon K. (Mole Valley) Carttiss, Michael
Baker, Nicholas (Dorset North) Cash, William
Baldry, Tony Channon, Rt Hon Paul
Banks, Matthew (Southport) Chaplin, Mrs Judith
Banks, Robert (Harrogate) Clappison, James
Bates, Michael Clark, Dr Michael (Rochford)
Batiste, Spencer Clifton-Brown, Geoffrey
Bellingham, Henry Coe, Sebastian
Bendall, Vivian Colvin, Michael
Beresford, Sir Paul Congdon, David
Biffen, Rt Hon John Conway, Derek
Blackburn, Dr John G. Coombs, Anthony (Wyre For'st)
Body, Sir Richard Coombs, Simon (Swindon)
Bonsor, Sir Nicholas Cope, Rt Hon Sir John
Booth, Hartley Cormack, Patrick
Boswell, Tim Couchman, James
Bowden, Andrew Cran, James
Bowis, John Currie, Mrs Edwina (S D'by'ire)
Curry, David (Skipton & Ripon) Heathcoat-Amory, David
Davies, Quentin (Stamford) Hendry, Charles
Davis, David (Boothferry) Heseltine, Rt Hon Michael
Day, Stephen Hicks, Robert
Deva, Nirj Joseph Hill, James (Southampton Test)
Devlin, Tim Hogg, Rt Hon Douglas (G'tham)
Dickens, Geoffrey Horam, John
Dicks, Terry Hordern, Sir Peter
Dorrell, Stephen Howarth, Alan (Strat'rd-on-A)
Dover, Den Howell, Ralph (North Norfolk)
Duncan, Alan Hughes Robert G. (Harrow W)
Duncan-Smith, Iain Hunt, Rt Hon David (Wirral W)
Dunn, Bob Hunt, Sir John (Ravensbourne)
Durant, Sir Anthony Hunter, Andrew
Eggar, Tim Jackson, Robert (Wantage)
Elletson, Harold Jenkin, Bernard
Emery, Sir Peter Jessel, Toby
Evans, David (Welwyn Hatfield) Johnson Smith, Sir Geoffrey
Evans, Jonathan (Brecon) Jones, Gwilym (Cardiff N)
Evans, Nigel (Ribble Valley) Jopling, Rt Hon Michael
Evans, Roger (Monmouth) Kellett-Bowman, Dame Elaine
Evennett, David Key, Robert
Faber, David Kilfedder, James
Fabricant, Michael King, Rt Hon Tom
Fairbairn, Sir Nicholas Kirkhope, Timothy
Fenner, Dame Peggy Knapman, Roger
Field, Barry (Isle of Wight) Knight, Mrs Angela (Erewash)
Forsyth, Michael (Stirling) Knight, Greg (Derby N)
Forth, Eric Knight, Dame Jill (Bir'm E'st'n)
Fox, Dr Liam (Woodspring) Knox, David
Fox, Sir Marcus (Shipley) Kynoch, George (Kincardine)
Freeman, Roger Lait, Mrs Jacqui
French, Douglas Lamont, Rt Hon Norman
Fry, Peter Lang, Rt Hon Ian
Gale, Roger Lawrence, Ivan
Gallie, Phil Legg, Barry
Gardiner, Sir George Leigh, Edward
Garnier, Edward Lennox-Boyd, Hon Mark
Gill, Christopher Lester, Jim (Broxtowe)
Gillan, Ms Cheryl Lidington, David
Goodlad, Rt Hon Alastair Lightbown, David
Goodson-Wickes, Dr Charles Lilley, Rt Hon Peter
Gorman, Mrs Teresa Lloyd, Peter (Fareham)
Gorst, John Lord, Michael
Grant, Sir Anthony (Cambs SW) Luff, Peter
Greenway, Harry (Ealing N) MacGregor, Rt Hon John
Greenway, John (Ryedale) MacKay, Andrew
Griffiths, Peter (Portsmouth, N) Maclean, David
Grylls, Sir Michael McLoughlin, Patrick
Gummer, Rt Hon John Selwyn McNair-Wilson, Sir Patrick
Hague, William Madel, David
Hamilton, Rt Hon Archie Maitland, Lady Olga
Hamilton, Neil (Tatton) Malone, Gerald
Hanley, Jeremy Mans, Keith
Hannam, Sir John Marland, Paul
Hargreaves, Andrew Marlow, Tony
Harris, David Marshall, John (Hendon S)
Haselhurst, Alan Marshall, Sir Michael (Arundel)
Hawkins, Nicholas Martin, David (Portsmouth S)
Hawksley, Warren Mates, Michael
Heald, Oliver Mawhinney, Dr Brian
Mayhew, Rt Hon Sir Patrick Spencer, Sir Derek
Merchant, Piers Spicer, Sir James (W Dorset)
Milligan, Stephen Spicer, Michael (S Worcs)
Mills, Iain Spink, Dr Robert
Mitchell, Andrew (Gedling) Spring, Richard
Mitchell, Sir David (Hants NW) Sproat, Iain
Moate, Roger Squire, Robin (Hornchurch)
Monro, Sir Hector Stanley, Rt Hon Sir John
Montgomery, Sir Fergus Stephen, Michael
Moss, Malcolm Stern, Michael
Nelson, Anthony Stewart, Allan
Neubert, Sir Michael Streeter, Gary
Newton, Rt Hon Tony Sumberg, David
Nicholls, Patrick Sweeney, Walter
Nicholson, David (Taunton) Sykes, John
Nicholson, Emma (Devon West) Tapsell, Sir Peter
Norris, Steve Taylor, Ian (Esher)
Onslow, Rt Hon Cranley Taylor, John M. (Solihull)
Oppenheim, Phillip Taylor, Sir Teddy (Southend, E)
Ottaway, Richard Temple-Morris, Peter
Page, Richard Thomason, Roy
Paice, James Thompson, Sir Donald (C'er V)
Patnick, Irvine Thompson, Patrick (Norwich N)
Pawsey, James Thornton, Malcolm
Peacock, Mrs Elizabeth Thurnham, Peter
Pickles, Eric Townend, John (Bridlington)
Porter, Barry (Wirral S) Townsend, Cyril D. (Bexl'yh'th)
Porter, David (Waveney) Tredinnick, David
Portillo, Rt Hon Michael Trend, Michael
Powell, William (Corby) Trotter, Neville
Rathbone, Tim Twinn, Dr Ian
Redwood, John Vaughan, Sir Gerard
Richards, Rod Viggers, Peter
Riddick, Graham Waldegrave, Rt Hon William
Rifkind, Rt Hon. Malcolm Walden, George
Robathan, Andrew Walker, Bill (N Tayside)
Roberts, Rt Hon Sir Wyn Waller, Gary
Robertson, Raymond (Ab'd'n S) Ward, John
Robinson, Mark (Somerton) Waterson, Nigel
Roe, Mrs Marion (Broxbourne) Watts, John
Rowe, Andrew (Mid Kent) Wells, Bowen
Ryder, Rt Hon Richard Wheeler, Sir John
Sackville, Tom Whittingdale, John
Sainsbury, Rt Hon Tim Widdecombe, Ann
Scott, Rt Hon Nicholas Willetts, David
Shaw, David (Dover) Winterton, Mrs Ann (Congleton)
Shephard, Rt Hon Gillian Winterton, Nicholas (Macc'f'ld)
Shepherd, Colin (Hereford) Wolfson, Mark
Shepherd, Richard (Aldridge) Yeo, Tim
Sims, Roger Young, Sir George (Acton)
Skeet, Sir Trevor
Smith, Sir Dudley (Warwick) Tellers for the Noes:
Smith, Tim (Beaconsfield) Mr. Tim Wood and
Soames, Nicholas Mr. Sydney Chapman.
Speed, Keith

Question accordingly negatived.

Clause 19 ordered to stand part of the Bill.

Bill (Clauses 19 and 20), reported without amendment; to lie upon the Table.