Investment Growth (Hansard, 23 November 1995)

§ 8. Mr. Clapham
To ask the Chancellor of the Exchequer what were the figures for investment growth (a) in 1975, (b) in 1985 and (c) at present. [698]

§ Mr. Kenneth Clarke
Whole economy investment fell by 2 per cent. in 1975. It grew by over 4 per cent. in 1985 and by over 3 per cent. in 1994.

§ Mr. Clapham
I hear what the Chancellor says. The right hon. and learned Gentleman will be aware, however, that the main ingredient of growth and prosperity is investment. The evidence shows that Britain has fallen in the prosperity league from 13th position to 18th over 16 years of Conservative government. Is that not abject economic failure?

§ Mr. Clarke
The hon. Gentleman asked a helpful question. He cited a Labour year in which investment fell and two Conservative years when it increased. He then made ridiculous use of the prosperity league and the table that he found in the White Paper on competitiveness. We were discussing only recently the performance of the British economy, which is now strong. It is expected to grow faster than any other economy in the G7, being equal first with Germany next year.
Investment prospects are very good. Manufacturing investment has increased by 12 per cent. on a year ago. The attempt to fiddle about with obscure historical comparisons obscures the fact that we now have the healthiest economic recovery in Europe. We shall maintain that recovery with our policies.

§ Mr. Yeo
Has my right hon. and learned Friend noticed that chart 3.5 in the White Paper on competitiveness, which is the source document for most Opposition Front-Bench spokesmen nowadays, shows that foreign direct investment into the United Kingdom over the past 12 years has been double that into the United States, three times that into France, six times that into Germany and 20 times that into Japan?
787 Does my right hon. and learned Friend agree that international investors are the most objective of all investors? They make a hard-headed judgment about which country offers the best prospects. On that basis, the resounding verdict is that the United Kingdom is more successful than any other western nation.

§ Mr. Clarke
For its size, the United Kingdom has a greater proportion of overseas investment than any other major country. It is also by far the leading attractor of inward investment. That investment is made by business men, who use their own money and shareholders' money when choosing where best to locate a manufacturing plant in the single market of the European Union. The overwhelming preference of overseas investors is to come to the United Kingdom. That is because of our flexible labour market and business-friendly policies, and because we have created the best environment in western Europe from which to sell goods and services.

§ Mr. Malcolm Bruce
Does the Chancellor of the Exchequer accept that while we all welcome inward investment it is a matter of concern that an increasing proportion of investment is coming from outside? Why does the right hon. and learned Gentleman think that British-based investors are prepared to invest more abroad than in this country? Perhaps he will respond to the comment made to me by the German chamber of trade in London that the United Kingdom is a good country in which to invest and the only people who fail to realise that are British investors.

§ Mr. Clarke
The CBI investment outlook is extremely good. I am not sure that what the hon. Gentleman said—namely, that British investors are investing more abroad than they are here—stands up, because that is not the case. Investment here is coming from Britain. It is coming very strongly from the rest of the European Union—most notably some large German acquisitions and investments in this country. It is coming very strongly from the United States and Japan. They are all making the same judgment: this is a healthy economic environment in which to invest. One of the attractions is that we do not have the social chapter. We also do not have the minimum wage, the old-fashioned trade union legislation—all the things that the Labour party threatens to bring back.

§ Mr. Jenkin
Does my right hon. and learned Friend agree that genuine, productive job-creating investment follows only once one has established a stable macro-economic and competitive environment? Is not perhaps one of the unsung achievements of the Government over the past three years that we have established an increasingly low interest economy in which it is competitive to invest?

§ Mr. Clarke
I agree entirely with my hon. Friend. We hear a great deal from the Opposition about a strategy for investment, which I have heard about for the past three years but which so far has never had any detail attached to it at all. People do not want Government strategies. They want a market that is likely to grow, a reasonable prospect of profitability, low inflation, interest rates that will not go back to the peaks to which they used to go—the stable economic environment that our macro-economic policy is giving them. That is what matters. That is why manufacturing investment is now growing so strongly.

§ Mr. Andrew Smith
In place of the Chancellor's complacency, will he now tell us why investment growth 788 at this stage of the economic cycle is slower in this recovery than in any recovery this century? Will he tell us why on investment we are 21st in the world economic league? Will he answer the question that he failed to answer this afternoon, just as he could not answer it when my hon. Friend the Member for Dunfermline, East (Mr. Brown) put it to him yesterday: why have we fallen from 13th to 18th place in the world prosperity league?

§ Mr. Clarke
I thought that that was last week's soundbite. We really should move on. I am fed up with the so-called "world prosperity league", which is a complete misuse of one table in our competitiveness White Paper. If the hon. Gentleman wants to produce some more world league tables on investment, I will look at them and see where they have come from. Presumably he has added Tuvalu to the list. The fact is that at the moment we have an extremely strong recovery. We have growth in the economy, and growth in consumer demand. We have a competitive position overseas, low inflation and we have investment.
Manufacturing investment is up 12 per cent. on 12 months ago. In plant and machinery, it is up 18 per cent. compared with 18 months ago, and the CBI survey shows that the outlook is very good indeed.

§ Sir Peter Tapsell
In view of the keen interest that Opposition Front-Bench spokesmen have taken recently in the international competitiveness tables, will my right hon. and learned Friend try to explain to them that the countries that have advanced most rapidly up those tables—particularly the gross domestic product table that was quoted to us yesterday—are precisely those that do not have a capital gains tax or an inheritance tax, such as Singapore, Taiwan and Hong Kong?

§ Mr. Clarke
We have already talked about the theories, on which the Opposition have touched, but so far I have not heard any Labour spokesman praise the economic policies of Hong Kong, Taiwan and Singapore, which are three of the countries that we are told have overtaken us. I have heard them many times praise, for example, Sweden and Finland, which we have overtaken. If one looks at the comparative position inside western Europe at the moment, one will see that we are the fastest growing major economy, the one that is winning jobs. The others have market policies that the Labour party espouses.