HC Deb 13 July 1995 vol 263 cc1076-7
5. Mr. Betts

To ask the Chancellor of the Exchequer what proposals he has to increase the level of investment in the economy. [32551]

The Economic Secretary to the Treasury (Mrs. Angela Knight)

Our objectives of low inflation and sound public finances are designed to ensure a stable macroeconomic environment, within which businesses can plan ahead with confidence. Industry is now responding. Manufacturing investment rose by more than 6½ per cent. last year.

Mr. Betts

Given that, between 1979 and 1994, Britain had the worst investment record of any of the G7 or European Union countries, and given that manufacturing investment fell in the first quarter of this year and that total investment is still 10 per cent. below its level prior to the recession, will the Economic Secretary answer the question which the Chief Secretary has failed to answer on two occasions? When resources become available, will the Government use them to assist investment in this country or will they waste them by spending £4 billion of public money on cutting inheritance tax and capital gains tax, which will benefit only a few relatively affluent people and do nothing to improve the underlying capacity of our economy? Will she answer that question?

Mrs. Knight

I find it very difficult to take seriously anything that the hon. Gentleman says about investment, as when he had opportunities and was in charge of Sheffield city council, he wasted £150 million building palaces of leisure for the world student games. That financial millstone has hung around the neck of everybody in that city for a generation. However, he will be pleased to learn that the latest investment figures show a strong pick-up in manufacturing, especially in the north of England.

Sir Timothy Sainsbury

May I first congratulate my hon. Friend on her very well deserved promotion to the Treasury Bench? I am sure that I speak for all Conservative Members in so doing. Does she agree that most investment, particularly in industrial companies, is funded from retained profits and therefore we should all welcome the increased profitability of British companies?

Mrs. Knight

I thank my right hon. Friend for his kind remarks. I entirely agree with his point. Since company profits are high, companies are managing to retain far more money which they can use for investment, to the benefit of companies and the country.

Mr. Beggs

Does the Minister agree that the availability of a highly skilled, well-qualified work force is always attractive to inward investors? Does she also agree that each right hon. and hon. Member has a duty to encourage teachers, students and those presently unemployed to obtain qualifications and skills in order to attract inward investment and generate wealth-creating jobs from which the whole economy will benefit?

Mrs. Knight

I agree with the hon. Gentleman. Education and training are very important indeed, which is why the Government have given them such a high priority. Since we are attracting so much investment into the United Kingdom, we are obviously doing a very good job in that respect.

Mr. Allason

Does my hon. Friend agree that the best way to improve the level of investment is to reduce bureaucracy, red tape and interference not only by local government and national Government, but by the European Union?

Mrs. Knight

My hon. Friend makes a very fair point. As part of my job, I shall certainly scrutinise European regulations to ensure that they benefit British industry.

Ms Armstrong

While I welcome the Minister to her first Question Time, can she tell us why manufacturing investment fell in the first quarter of this year? Is she confident that she will be able to sort out the fact that total investment is 10 per cent. lower than it was in 1989 before the recession? With all that going on, how does she justify the priority given to getting rid of capital gains tax and inheritance tax?

Mrs. Knight

The hon. Lady has been mixing her figures. I am sure that she will be delighted to learn that there is a strong pick-up in manufacturing investment, which increased by 8¾ per cent. in the first quarter of this year over the same period in 1994. That is an increase, not a reduction. One factor that aids investment in British industry is a strong economic climate. We have one now and will continue to have one.