HC Deb 02 February 1995 vol 253 cc1210-1
9. Mr. Bellingham

To ask the Chancellor of the Exchequer when he next expects to meet the Governor of the Bank of England to discuss investment in manufacturing industry.

The Chief Secretary to the Treasury (Mr. Jonathan Aitken)

My right hon. and learned Friend the Chancellor regularly meets the Governor of the Bank of England to discuss the prospects for inflation and the current state of the economy, including developments in manufacturing investment.

Mr. Bellingham

Is the Chief Secretary aware that business investment is forecast to grow by a staggering 11 per cent. this year? Is not that a complete vindication of the Government's economic policies? Is he further aware that throughout the past year the Labour party have consistently attacked the Government about the lack of investment in manufacturing industry? In light of those figures, should not the shadow Chancellor eat his words, admit that he was wrong and congratulate the Government?

Mr. Aitken

I would certainly share my hon. Friend's relish in seeing the shadow Chancellor eat his words, but the meal would be so gargantuan that I do not think that it is a very likely outcome.

My hon. Friend is correct to refer to the fact that the Confederation of British Industry has forecast that manufacturing investment will rise by ll¼ per cent in 1995. The manufacturing sector in this country is buoyant and in a strong competitive position. In the three months to November, output was up by 5 per cent., productivity was up by more than 6 per cent. and unit wage costs were down by more than 1 per cent. That is a record of success of which the Government and the country can be proud.

Mr. Sheerman

If the manufacturing sector is to be truly successful in this country and win back home markets as opposed to export markets, is not it about time that the Chancellor and the Bank of England encouraged our financial institutions to think about long-term investment in British manufacturing capacity, rather than engaging in short-termism?

Mr. Aitken

I am sorry that, judging from the tone of the hon. Gentleman's question, he does not acknowledge the tremendous success story of British manufacturing industry in export markets. It has been faring extraordinarily well. His charge of "short-termism" is unfair. Anyone who has ever run a business will know that at this point in the economic cycle it is normal for companies to restructure their balance sheets and build up their profits. Investment is expected to improve at the turn of the cycle, and that is why the CBI is forecasting an 11¼ per cent. increase in manufacturing investment.

Mr. Forman

If British manufacturing industry is to retain its competitive edge in highly competitive world markets, does my right hon. Friend agree that investment in human capital is every bit as important as investment in plant and equipment? Are the figures for investment in human capital as encouraging as the figures that he has given already?

Mr. Aitken

There is certainly continual investment in human capital in the form of the large training budgets allocated by the Government and private industry. I acknowledge my hon. Friend's point that human capital is important. However, I also draw his attention to the fact that unemployment is now falling by a rate of 2,000 per day, which shows that human capital is being well deployed in the continuing success story of British industry.