HC Deb 15 January 1998 vol 304 cc471-3
4. Mr. Gordon Prentice

What representations he has received from manufacturing industry about the effect on exports of the value of sterling. [21054]

The Economic Secretary to the Treasury (Mrs. Helen Liddell)

Treasury Ministers receive numerous representations from business on a wide range of issues, including the impact of the strength of sterling. The Government are committed to open discussion of our economic performance with a view to achieving a shared sense of economic purpose. We take seriously the views that have been made available to us.

Mr. Prentice

I thank my hon. Friend for that reply, but is she aware that in my constituency of Pendle, 44 per cent. of employees work in manufacturing industry, as against a national average of about 19 per cent., and there are real concerns about the appreciation of sterling against other currencies? In the past year, the pound sterling has risen by 21 per cent. against the deutschmark, 16 per cent. against the yen, 16 per cent. against the ecu and 5 per cent. against the American dollar. Firms are cutting prices and profit margins just to maintain market share, and that cannot continue indefinitely. Can my hon. Friend give manufacturing industry any encouragement that matters will improve in the short term?

Mrs. Liddell

I take on board my hon. Friend's point about the difficulties being experienced in his constituency, but the CBI and British Chambers of Commerce have pointed to manufacturing industry's strong performance throughout the north-west. I welcome the fact that throughout the north-west firms are performing strongly in a range of industries, including chemicals, pharmaceuticals and food and drink. But it is important to ensure that companies face macro-economic stability so that they can plan ahead for the future, and since the Government were elected on 1 May our policies have been designed to provide the kind of economic climate that allows manufacturing industries to be competitive and to plan ahead for the future.

Mr. Clifton-Brown

Does the Economic Secretary agree that the current strength of sterling is the forgotten factor in the Government's economic and particularly monetary policy? Does she agree with the old City maxim that a 10 per cent. appreciation of the pound is equivalent to an increase of about 1 per cent. in interest rates? Will not this excessively tight monetary policy lead to one of the lowest growth rates in the European Community in two years' time? The National Institute of Economic and Social Research has calculated that we will have a growth rate of about 2 per cent. in two years' time, which will be the lowest of all 15 member states of the EU, in contrast with one of the highest growth rates under the previous Government's economic management.

Mrs. Liddell

The hon. Gentleman seems committed to trying to return Britain to the kind of stop-go, boom and bust economic policies of the previous Government—a Government who made sure that this Government inherited an economy with an inflation problem. The most sensible course of action for this economy is to obtain the climate of stability that the Government seek to achieve. We are conscious of the many pressures on manufacturing industry, and the hon. Gentleman is talking rubbish if he suggests that our attitude to sterling is to make it a forgotten problem.

Mr. John D. Taylor

Is the Minister aware that since the Dublin Government announced three months ago that they would join the euro, the punt in southern Ireland has declined by 20 per cent. against sterling which operates in Northern Ireland, and that that is now a major barrier to trade between Northern Ireland and the Republic? Will the Government, in their role as President of the European Finance Ministers and in the context of the joint statement by both Governments on Monday on the creation of a council of the various devolved assemblies and Governments within these islands so that we can act in co-operation, approach the Dublin Government to see whether it would be possible for the pound sterling to join the euro at the same time as the Republic of Ireland?

Mrs. Liddell

The UK Government's responsibility, in their role as President of the EU, is to be open and fair in the negotiations that will take place during the next few months. Those are critical negotiations for the future of the EU and its economies. In that setting, it is appropriate to pay tribute to the extent to which the EU is contributing to the process of peace and reconciliation in Northern Ireland.

I assure the right hon. Gentleman that we shall discharge our responsibilities, as part of the presidency, with fairness and justice, and shall take into account the difficulties that different countries experience. However, when the Council of Finance Ministers meets to discuss those matters it must take into account the overall impact on all the economies of the European Union, both individually and collectively.

Mr. Sheldon

Is it not clear that the high level of the pound and of interest rates is affecting manufacturing industry much more than service industries? Will my hon. Friend therefore consider further assistance to the manufacturing industry?

Mrs. Liddell

My right hon. Friend makes a good point. There is a differential between the performance of the service sector and the manufacturing sector. Notwithstanding that, official estimates still point to continued growth in exports from the manufacturing sector. We take on board the point that my right hon. Friend makes about assistance to manufacturing industry. Indeed, the Minister for Trade has already established arrangements to assist companies in their marketing operations abroad. We have also embarked on a research programme to find the means whereby we can encourage especially small and medium enterprises to promote exports abroad and we shall continue to look closely at the matter to ensure that we create the most propitious circumstances for our manufacturing industry throughout the United Kingdom.