Manufacturing and Industrial Relations

HC Deb 13 July 1998 vol 316 cc19-78

Madam Speaker

We now come to the Opposition motion on manufacturing and industrial relations. I have selected the amendment in the name of the Prime Minister.

3.30 pm

Mr. John Redwood (Wokingham)

I beg to move, That this House views with alarm the Government's creation of a boom and bust economy in the UK, with industry being badly damaged by high sterling and rising interest rates whilst wage and price inflation accelerates; expresses concern at the growth of industrial unrest in several sectors of the economy; and urges the Government to rethink its approach both to manufacturing and employee relations before more damage is done. "Business confidence hits five-year low": today's business headline in the Financial Times and other leading newspapers says it all. The Government are creating a them and us economy: a booming economy for the Government, their advisers and their lobbyists; a bust economy for people who dare to make things or try to sell abroad.

The Government proudly tell us that they have been elected to stop the trade cycle. The President of the Board of Trade is as likely to stop the trade cycle as I am to find a regular tube service on the Central line today. The Government stand Canute-like on the edge of a manufacturing recession claiming that the tide of lost jobs and closed factories is not coming in or has nothing to do with them, while the rest of us see the waves that they have generated enveloping British industry in closures and depression.

When we last debated these matters, the President of the Board of Trade told the House that the Government were to establish a competitive and stable exchange rate. She refused to recognise that, with the pound at its present level, it cannot be both. I confess that there has been more stability recently, but stability of the pound at around DM3 means more stability in the level of pain to manufacturers; more stability in the level of pain and difficulty for those seeking to export; and more stability in the terrible loss of jobs and loss of orders that now afflict our manufacturing heartlands.

It has certainly meant more job losses announced in steel, engineering and textiles. It has meant more job losses in the manufacturing heartlands of the north and the midlands. I hope that Labour Members will, for once, speak up about the fears and worries of their constituents. Many Labour Members represent those heartlands.

Mr. Barry Sheerman (Huddersfield)

Will the right hon. Gentleman give way?

Mr. Redwood

I hope that the hon. Member for Huddersfield (Mr. Sheerman) will confirm what I have said about the difficulties facing manufacturers in his constituency.

Mr. Sheerman

The right hon. Gentleman is right. Labour Members are concerned when times get tougher rather than easier, and they are not as easy as they could be at the moment. I must respond to the right hon. Gentleman's remarks. Between 1979 and 1997, under the previous Administration, 2.6 million jobs were lost in manufacturing. Blame for the basic state of our manufacturing industry should be laid at the door of Thatcher, Major and the Administrations of which the right hon. Gentleman was a part.

Mr. Redwood

The hon. Gentleman should have referred to my right hon. Friend as the right hon. Member for Huntingdon (Mr. Major).

Mr. Sheerman

I am sorry.

Mr. Redwood

The hon. Gentleman is wrong. The Leader of the Opposition and I have, on several occasions—often at the behest of Labour Members, but sometimes voluntarily—confessed that mistakes were made in the early 1990s when we were in the exchange rate mechanism. Conservative Members regret that: we have been over this matter many times before, and we have apologised to the nation. I am waiting for an apology from Labour Members. Why will they not apologise for supporting that policy? It was the only economic policy of the Conservative Administration that they ever supported, and it was the one that went wrong and did damage.

Mr. Nicholas Soames (Mid-Sussex)

I congratulate my right hon. Friend on the measured way in which he responded to that fatuous intervention.

Is my right hon. Friend aware that, in my constituency, companies that have done extraordinarily well in the past few years are now under great and increasing pressure? As of the last few weeks, there is a risk of numerous manufacturing redundancies in the south-east. How does that put the remarks of the hon. Member for Huddersfield (Mr. Sheerman) into context?

Mr. Redwood

My hon. Friend is right. There is a threat to manufacturing jobs in all parts of the country, including his constituency and those of other Conservative Members in the south of England, as well as the areas in the north and the midlands to which I have referred.

The hon. Member for Huddersfield began by agreeing that times are difficult, and I was grateful for that. What he and his right hon. and hon. Friends do not appreciate is this. The present Government now purport to be in control. They have been on watch for more than a year, and they have made many changes in economic policy. It is their tax rates that are now determining our economic future; their interest rates, through the Bank of England, that are determining the future of manufacturing; their sterling rate policy, or lack of one, that is doing the damage. I would have accepted, after a month or two of Labour Government, that what Conservatives had done had had more impact than what Labour was doing. Our case today, however, is that it is Labour's policies that are coming home to roost, and Labour's policies that are doing the damage. If Labour had stuck with our policies, fewer factories would have closed.

Mr. Dale Campbell-Savours (Workington)

What would the right hon. Gentleman do to reduce the exchange rate? Would he reduce interest rates? Is that the policy that he would pursue?

Mr. Redwood

I am grateful to the hon. Gentleman for seeking advice from the Opposition in these parlous times for the Government. If he will restrain his impatience, I will set out later in my speech six measures which I think will help a great deal; but I will give him one easy answer to start with. I believe that the Chancellor should promote savings rather than taxing them. If he promoted savings, the Bank would not need to drive interest rates so high. It has driven them so high because it despairs of the low savings rate in this country, and of excess consumption.

Mr. Campbell-Savours

May I ask the right hon. Gentleman exactly the same question? Would he reduce interest rates—yes or no?

Mr. Redwood

I am saying that the Opposition would follow policies that would produce lower interest rates, even from a so-called independent Bank of England. I will set out at some length the way in which we think the Government, even now, should do that.

Why does the hon. Gentleman not understand that, if the Government reversed their policies on the taxing of savings, more money would be saved and less would therefore be spent? The Bank would then be less worried about inflation taking off in the shops and the service sector, and would not need to panic about interest rates as it has to now, given the awful policies followed by the present Government.

Mr. Denis MacShane (Rotherham)

I read in the papers this morning that the right hon. Gentleman's party was about to embark on an apology tour of the country. I hope that he will be leading those in sackcloth and ashes.

The right hon. Gentleman has blamed the early 1990s. Is he aware that the collapse of profits—not yet jobs—in the steel industry arises directly from the increase in sterling that took place in the last year of Conservative Government? Between May 1996 and May 1997, sterling rose by 70 per cent. against European currencies; since then, it has risen by 9 per cent. The former Chancellor is responsible for the 70 per cent., and we are responsible for the 9 per cent. Will the right hon. Gentleman join me in condemning the former Chancellor as a useless has-been who has nothing more to say on current economics?

Mr. Redwood

The last Chancellor of the Exchequer did a great deal more good to British industry than the present Government have done in their first year.

The hon. Gentleman should check his facts. There is no way that sterling appreciated by 70 per cent. against the European currencies in a single year—our last year in office. That is complete nonsense. What is true is that the level of sterling when we left office was high but just about bearable for those manufacturers; and it is the further turn of the screw over the past year under Labour that has done the real damage and led to all those announcements of further job losses.

Mr. Sheerman

May I try to be helpful on that point?

Mr. Redwood

I do not know whether the hon. Gentleman will be helpful, but I give way.

Mr. Sheerman

I am seeking to be helpful. The Library has given me a list of interest rates over the past 40 years, which clearly show that the previous Chancellor was not the only person responsible for high interest rates and what happened to our country. From 1979 until the most recent terrible recession, Conservative Governments almost without exception were persistently high-interest Governments, who made a competitive disadvantage the bedrock on which our industry had to build. That is the truth. If the right hon. Gentleman wants me to pass the figures to him, he can read them out.

Mr. Redwood

The hon. Gentleman should look at the real interest rate and understand that we inherited very high inflation from the outgoing Labour Government in 1979. Interest rates in nominal terms had to stay high for quite a time to cure that, but, in the 1980s, with much help from the private sector, the Conservative Government rebuilt, for example, the motor industry, which had been gravely damaged in the 1970s by the Labour Government. Now a new Labour Government, after only just over a year in office, are beginning to do the same sort of damage to those industries that they did in the 1970s—back to the past; back to the problems. There have been more job losses in all the crucial industries and in manufacturing heartlands throughout the country.

Meanwhile, where the Government can make a difference—where the Board of Trade could do something to help business—business is left in doubt about the Government's intentions, as the Government prove unable to make up their mind. We need to know: are the Government willing and able to save the pits, or will coal jobs go the way of those many other jobs in exporting industries that are being lost?

We need to know why we were treated to a non-statement on energy, with all the detail left out and left over for a later date. Why have we been drifting without an energy policy for a whole year? Does the President of the Board of Trade plan to announce a proper policy to the House before it rises? [Interruption.] The Minister for Science, Energy and Industry comes in on cue, saying, "Not again." I will go on asking those questions until there is a proper energy policy that we can understand and that the country can either support or criticise.

Does the President of the Board of Trade plan to announce this proper policy before the House rises, or is the intention to leak it to the press during the recess, when we are not able to scrutinise it properly in the House? The right hon. Lady has had over a year to produce a sensible policy and there is still nothing: no detail, no reassurance for coal or for gas, everyone left in the dark. At least the lights are still on, because we have a privatised industry; if Labour was running it, I doubt whether that would be true.

When will the President of the Board of Trade have a policy for the nuclear industry? Has she yet decided how to phase the rundown of Dounreay? Will she tell us if she is satisfied that all the other nuclear facilities that are currently working are safe and have a safe future under her stewardship at the Department of Trade and Industry? How long is she going to hold up gas power station applications? Is she sure that it is legal to do so? When will she realise that, if she wishes to be greener, she has to be friendly to gas?

When will the DTI have a policy for the Post Office? The Royal Mail is being held up by Government delays. The management would like to do some deals with private sector companies throughout the world. The Post Office understands that it is a fast-moving global marketplace and wishes to join in, but, obviously, it cannot do so with a full Treasury guarantee and the current ownership structure. Will the President of the Board of Trade let the Post Office develop as a global corporation doing well for Britain? Is she brave enough to convert the Post Office into a public limited company and introduce private capital?

Mr. Ian Bruce

I wonder whether my right hon. Friend is being somewhat unfair to the President of the Board of Trade. Surely, all those issues are going to be decided by No. 10, the Treasury and the magic circle—and we all know that she is not part of that.

Mr. Redwood

It is true that some lobbyists have put around that slur on the reputation of the President of the Board of Trade, but, for once, I am being fairer to her than my hon. Friend. I am assuming that, in future, she will have some influence on these matters and will at some point use her high office of state to try to do some good for British industry. I confess—my hon. Friend is right—that there is no evidence so far, but I live in hope that she will one day come up with a policy and that that policy may do a little good. Why will we have to wait for a year and a half before the Government can answer simple questions on the future of the Post Office?

I ask the President of the Board of Trade—if she has finished talking to her colleagues on the Treasury Bench—why the Chancellor is lecturing us all on the need to keep wage increases down if we wish to preserve jobs while she is busily legislating to put wages up.

Has the right hon. Lady had any more thoughts about her minimum wage legislation? Does she not understand that our worry about it is primarily that it will lead to all sorts of pay rises for those on rather higher pay who wish to keep their differentials? I have heard no convincing argument from her that that is unlikely to happen. I also find it extraordinary that her Department—in this time of open government, which we know and love so well—is not prepared to give us the figures and forecasts and tell us the truth about how many jobs will be lost and by how much wages will rise as a result of her policy, which is pulling in exactly the opposite direction to that of the Chancellor of the Exchequer.

Mr. MacShane

The right hon. Gentleman is being generous in giving way. As he is dealing with the wages problem, would he care to tell the House how much he is being paid as a consultant by Murray Financial to undermine building societies and mutual insurance firms?

Mr. Redwood

I am a director of that company, which is not out to undermine building societies. Although I do not wish to spend the debate answering for that company rather than dealing with matters of public policy, I am quite happy to declare that I receive from that company a director's fee of £12,000 a year, which is a modest one. The company has no intention of raiding building societies that do not wish to talk to it.

I do wish that Labour Members would get away from trying to cast slurs on those who are pursuing a decent occupation, and would get on with understanding the grave problems that the Government face and the Government's relationships with lobby companies. When we come to the real issues at the bottom of this debate, I doubt whether I will receive from Labour Members any answers as straight and honest as the one that I have just given.

Why is the Chancellor of the Exchequer for ever lecturing us on the need for prudence, only then to announce a rapid expansion of public spending? I wonder whether we will even have to come to the House to hear an announcement, as I am sure that we will read all about it in the newspapers well in advance of the event.

Why is so much of the spending to go on welfare when the Government, when in opposition, said that they would spend less on what they then called "economic failure".

Dr. Stephen Ladyman (South Thanet)

I am grateful to the right hon. Gentleman for giving way before he moves too far away from the question asked by my hon. Friend the Member for Rotherham (Mr. MacShane). The right hon. Gentleman has said that he wants to encourage saving and to keep inflation and interest rates down. Does he not understand that windfalls for the few were one of the main inflationary pressures that led to interest rate rises; that the windfalls were already affecting the economy when the Government came to power; and that he—by joining Murray Financial—will continue them in future?

Mr. Redwood

I am delighted that the hon. Gentleman thinks that Murray will be so successful that—from being such a small company—it will have an impact on the United Kingdom money supply. However, I think that it is better if I speak for the Opposition and not for the company, which he is dragging me into doing.

When will the President of the Board of Trade get around to making some decisions on how the new competition policy is meant to work? Does she not realise that the Competition Bill—her Bill—is weak on monopolies and services of general economic interest? Does she not worry that it is so badly drafted that pubs and brewers, newsagents and publishers, oil companies and filling stations still do not know where they will stand when it comes into effect?

It has been a very wet June, and July has been even wetter. The weather has been cold enough to leave people diving for pullovers rather than swimsuits. England was ejected from the world cup competition amid controversy about the conduct of one of the star players, and with relief that a small band of hooligan supporters would return home early. The cricket team has not done well in the tests. I remember Labour saying that things would be better if it was elected. It has not worked out like that this summer.

I do not blame the Government for the deterioration in the weather or for the sporting disasters—although doubtless they would have claimed credit if things had turned out differently—but I do blame them for changing the business climate for the worse. I do hold them responsible for playing the economy so badly that manufacturing is already in recession. I do hold them responsible for disrupting our hard-won trade union settlement with their half-baked reforms. Let us make no mistake about it—Labour is taking us back to the bad old days and the bad old ways of the 1960s and 1970s.

The Government inherited the best strike record of any country in Europe. Last week, there was a firefighters' strike in Essex, today there is a tube strike, and soon there will be rail strikes. I fear that other public service workers will also go on strike as they watch the private sector wage explosion that the Government have triggered while their own pay falls far behind.

The Government inherited low business taxes. They have already increased them by £25 billion during this Parliament and are planning more tax raids on success and enterprise. It would be helpful to the oil industry if the President of the Board of Trade could tell us something about the Government's intention to raid the oil companies, but I expect that that will be another issue that they will leave until the recess, when Parliament is not here to cross-examine them on another set of tax increases.

The Government inherited low inflation. Wages are now rising at a rate of 5.9 per cent. a year in the private sector, and inflation is well above the outgoing Government's target or the current Government's target. It is not just City bonuses; wage inflation is setting in thanks to Government policies. They inherited a respectable level of savings and they said that the country needed to save more. I agree. That would have been the right response to the gathering momentum in the economy. Instead, according to Red Book figures, the country will save 1 per cent, less of our national income this year—around £8.5 billion less savings—thanks primarily to the taxes that the Government imposed on pension funds and the replacement of personal equity plans and tax-exempt savings accounts with something less generous.

The Government inherited low interest rates. Now, six rate rises later, and with more threatened and likely, things are not nearly so easy for business borrowers. Perhaps the Government foolishly believed one of Labour's five promises: that interest rates would be kept as low as possible. Perhaps the Government will have the gall to say that they honoured their promise, since for them it is not possible to keep rates very low.

The Government inherited a high, but just manageable, level of sterling. They have increased it to a level at which exporting is either impossible or unprofitable for many firms. In place of the success that we were generating, Labour offers strikes, more laws and higher taxes. In place of financial prudence, Labour offers higher public spending.

Mr. John Bercow (Buckingham)

Does my right hon. Friend agree that the Government are most certainly to be held to account for foolishly giving up for determination by qualified majority voting within the European Union an increasing range of domestic working practices which should properly be the responsibility of elected parliamentarians and the British legislature? Does my right hon. Friend recall that, when challenged on that point by John Humphrys on the BBC programme "On the Record" on 9 November 1997 as to what she would do if the European Commission proceeded with plans for national works councils, the President of the Board of Trade feebly responded, "Well, er, we shall see how things go"? It is not encouraging, is it?

Mr. Redwood

Indeed it is not. The President of the Board of Trade has suddenly discovered two things: first, the proposal is not popular, and, secondly, she may not be able to block it because it may be wanted on the continent. They never explained that to her at No. 10 when they were setting out the joys of the social chapter.

The Wall Street Journal Europe summed it up rather well, in respect of just such a proposal and just such difficulties, when it stated: the only thing "new" about New Labour seems to be an old-fashioned failure—European corporatism". The Government are busily disguising the true cost of their social security and welfare-to-work programmes, embarrassed as they are about the fact that their spending is soaring well above our totals in the interest of paying for what they always used to call economic failure. In the place of common sense to control wage inflation, Labour has decided to give powers to shop stewards and to Brussels, making it more difficult to preserve good labour relations and inflation-free wage increases.

Mr. Sheerman

Just to be helpful to the right hon. Gentleman, if things are so bad—[Interruption.]

Mr. Redwood

I was about to give way to the hon. Gentleman, but I wonder whether I should do so now, in view of his impatience.

Mr. Sheerman

Before anyone panics at the right hon. Gentleman's tale of decline—if a few people somewhere are still able to listen to the proceedings of the House of Commons—may I refer hon. Members to Mr. Adair Turner's foreword to the July-August edition of CBI News? Mr. Turner represents a large section of British business and is very warm about the Labour Government; he is not ringing any alarm bells. He says: The Fairness at Work White Paper finally came out in May. As expected, it was a mixture of good and bad news. It certainly represented a shift towards employee rights, but it was by no means as dramatic as might have been feared, and it leaves intact much of the industrial relations legislation of the 80's". If even Mr. Adair Turner is not worried about what we are doing, why is the right hon. Gentleman so full of doom and gloom?

Mr. Redwood

The Confederation of British Industry is very worried about the social chapter, as it believes that further damaging policies could emerge about which we could do nothing. The quotation that the hon. Gentleman read said that the only good thing about the Government was that they had not wrecked all the 1980s legislation. Surely the answer is to retain the 1980s legislation and to do something else more profitable for British enterprise and jobs.

Labour is creating an economy fit for lobbyists to thrive in. The refusal of the Department of Trade and Industry to spell out an energy policy has encouraged some to try to write that policy by hiring lobbyists. The uncertainty of the Department of Health about tobacco advertising made the Government prone to changing their mind when the right pressure was applied. As manufacturers suffer, lobbyists thrive.

Does the President of the Board of Trade think that that is a healthy state of affairs? Does modernising the economy mean closing down steelworks and textile mills, so that the only growth is in the behind-closed-doors influence business for former Labour advisers, who are now dining out in style? Are we to rest content with a crony economy in which even the Audit Commission needs a lobby firm to do its research? What has happened to all those old-fashioned values that the Chancellor and the President of the Board of Trade espoused in opposition, to sustain an industrial economy in which firms went from strength to strength by making things and selling them abroad?

Mr. Campbell-Savours

Hear, hear.

Mr. Redwood

I am delighted that at least one old Labour Member remembers those promises. Unfortunately, as he knows, Labour Front Benchers are not delivering on those beliefs; they are failing to live up to those genuine sentiments that some Labour Members hold.

Today, I ask the President of the Board of Trade to promise a new set of rules to govern lobby companies. Will she reassure us that we shall always be able to know who the directors are, who the principal shareholders are, how much the directors are paid and how much income and expenditure the business enjoys? That is not asking too much, as I am sure Labour Members will agree. Surely the public should be able to know such simple things about a business that sets out to lobby the British Government and to influence public policy.

Mr. James Gray (North Wiltshire)

Is my right hon. Friend aware that the Association of Public Policy Consultants—the body that looks after lobbying companies—is strongly in favour of precisely the registration that he describes?

Mr. Redwood

I am grateful to my hon. Friend. What he says makes it much easier for the President of the Board of Trade to throw the weight of her office behind such proposals.

Mr. Campbell-Savours

Will the right hon. Gentleman give way on that point?

Mr. Redwood

May I give way at the minute of my choosing? I want to develop the argument a little.

Members of Parliament are paid to lobby the Government in the interests of their constituents. Rightly, we are expected to declare our sources of income and any directorships that we may hold. I decided to discover what I could find out about two of the lobby companies that have recently been much in the news.

Mr. Campbell-Savours

What has that got to do with the motion?

Mr. Redwood

It has a lot to do with the motion. I am arguing that there are two economies. It seems that the only way in which the manufacturing companies, which are in serious distress, can get their message to the Government is by spending even more money on hiring lobbyists to make their case for them, as the Government are bypassing Parliament and not listening to the many representations that we are making. I wanted to know who owned GPC Market Access. I was told—

Madam Speaker

Order. In the past five or 10 minutes, the right hon. Gentleman seems to have strayed a long way from the motion to which he should be speaking. I urge him and other hon. Members to speak to the motion and the amendment.

Mr. Redwood

I will, of course, speak to the motion, Madam Speaker, but part of our case is that, to have more successful Government policies for the industrial economy, we need to change our arrangements for lobbying, and, with your consent, I would like to develop that a little further.

I asked who owned GPC Market Access Group Ltd., and I discovered that it is owned by Countrywide Porter Novelli Ltd.—

Mr. Campbell-Savours

On a point of order, Madam Speaker. I have examined the motion and the amendment carefully, and I cannot see how what the right hon. Gentleman is saying relates to them. Could you clarify the matter, because it seems to me that he is totally out of order?

Madam Speaker

I have already made my views known to the right hon. Gentleman. I hope that I have a sense of humour, and I enjoy a little bit of knockabout as much as anybody else in the House, but I think that he should now deal with manufacturing and industrial relations.

Mr. Redwood

As I was saying, Madam Speaker, I believe that we need to know more about how the lobby groups work to see whether they are the right way for manufacturing industry to make its case. I discovered that Diversified Agency Services Ltd. and GPC International Holdings of Ottawa—

Mr. Campbell-Savours

On a point of order, Madam Speaker. The right hon. Gentleman is simply ignoring what you are saying.

Madam Speaker

The right hon. Gentleman will not defy me for much longer. I will give him two more minutes to return to manufacturing and speak to the motion.

Mr. Redwood

I am grateful, Madam Speaker.

I want the House to know that a company such as LLM is 40 per cent. owned by Robert Stevens Holdings, which in turn is owned by trustees in Jersey. Bedell and Cristin Trustees is owned by Premier Circle Ltd. and Second Circle Ltd., which is owned by Premier Circle Ltd. and Third Circle Ltd., which is owned by Premier Circle Ltd. and Second Circle Ltd.

Why does a lobbying company, set up by former Labour advisers to pursue the interests of, say, manufacturing industry, have such a complicated shareholding structure? What is the role of the Jersey trusts? Why are there three Circle companies, and why do any reasonable inquiries about them go round in circles? Why is one of the companies called Premier Circle? Could there be some mistake over the exacting meaning of Premier in this context?

What do the Government think about the use of Jersey trusts and companies to control shares in other companies owned by former Labour advisers? Did not those same advisers help the Chancellor of the Exchequer when, as an Opposition spokesman, he made speeches condemning the use of offshore vehicles? Do the Government believe—

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

On a point of order, Madam Speaker. In my constituency, there are many manufacturing units in very real trouble. I had hoped that we would be debating that today. Lobby companies are not known for manufacturing a great deal, except rather more heat than light.

Mr. Ian Bruce

Further to that point of order, Madam Speaker. I know that the House has examined the motion carefully, but we should also look at the amendment, which welcomes the new culture of partnership…developing within the framework of measures and proposals the Government is taking forward". That is clearly germane to the partnership that the Government now have with the lobbyists and the cronies.

Madam Speaker

I accept that that is mentioned, but the debate has been going on for 32 minutes and we have not yet heard about manufacturing. I represent a vast area that is closely interested in manufacturing. My black country towns will be very interested in this debate. I shall see that my manufacturers have a copy of the Hansard report.

Mr. Redwood

I think that I have asked the questions that I wanted to ask about that group of companies, but the Government must answer them, given the width of their amendment and the fact that, like it or not, lobbying is now part of our business culture. Businesses need to be told, fair and square from the Dispatch Box, that the Government intend to go back to the old system: if business has a problem, it lobbies its Member of Parliament, who lobbies the Minister. That is how it should be done. It should not be done through the back door via exotic companies and strange holdings, including Jersey trusts. I hope that the President of the Board of Trade agrees that that is an odd way to behave. The old parliamentary way is the best.

Mr. MacShane

Does the right hon. Gentleman agree that a firm has the third option of hiring an hon. Member from the Tory Front Bench, just as Murray Financial has done in his own case? Nineteen other Tory Front Benchers have extensive outside interests. That is the real sleaze and corruption that worries the people of this country.

Mr. Redwood

Madam Speaker, I hope that the hon. Gentleman will withdraw his disgraceful allegation.

Madam Speaker

Order. I was distracted, and did not hear all that the hon. Member for Rotherham (Mr. MacShane) said. Would he repeat it precisely so that I can make a judgment?

Mr. MacShane

I said that what worries people outside the House is the record of Conservative hon. Members in government and in opposition being hired by outside firms to represent their interests. That sleaze and corruption—

Madam Speaker

Order. I have heard enough. The debate should be about policies and principles, not about individuals. The sooner we get on to the policies and principles of manufacturing and industry, the better it will be for the House. The way this debate is turning out is a disgrace.

Mr. Redwood

Labour Members should understand that there is nothing wrong with a Member who is not in the Government holding a directorship that is properly declared, so long as the House is not used to further the interests of the company concerned. If the hon. Member for Rotherham (Mr. MacShane) is suggesting that any of my right hon. and hon. Friends has done otherwise, he should make a proper allegation, giving them the right to reply. I can assure him that it is not so. He is just trying to put up a smokescreen to hide the dreadful business culture that the Government are encouraging or allowing to occur.

I turn now to positive conclusions on what we should do to help manufacturing industry.

Mr. Sheerman

On a point of order, Madam Speaker. We are getting to the heart of a principle important to a debating chamber such as Parliament. When someone speaks here, does he or she speak for his or her constituents, or does he or she speak for a particular interest that probably pays more than a parliamentary salary? It is important that—

Madam Speaker

Order. The right hon. Member for Wokingham (Mr. Redwood) is speaking on behalf of the Opposition. He has just announced that he is getting to the substance of what he has to say.

Mr. Redwood

I want to make six points about how to help industry out of the terrible position it is in while services and other companies are booming.

First, the Government should promote savings, not tax them. They should change their minds on taxing pension funds, and on replacing personal equity plans and tax-exempt special savings accounts with something that is less satisfactory and generous. They should think up new policies to promote savings. It is better to save more than to put manufacturing and exporting into a vice.

Secondly, there is social legislation. We all want people to have decent conditions at work and good health and safety protection. However, does not some of the Government's legislation go too far? It will destroy jobs, and remove opportunities for the young and unskilled people who most desperately need a first step on the ladder. That is not kindness; it is callousness of the first order.

Thirdly, we need stable policies, and statements from the Government of their policies on crucial industries and nationalised companies. We need a policy on financing the tube network, and a resolution of the strikes. We need a policy on energy, so that the gas and coal industries know where they stand. We need a policy on the Post Office, so that it can grow and expand abroad to improve its competitive position there and at home. We need a policy on water competition—we have been waiting for that for a long time—which could generate new jobs and new business. We need a proper policy on competition after a sham of a Bill that is full of holes and errors. The Government have been unwilling to tell companies where they stand.

Fourthly, we need a monetary policy that makes sense. The experiment of handing policy to the Bank of England has led to a monthly debate being leaked and discussed in the newspapers. It is a kind of soap opera, with the Government looking on and saying that it is nothing to do with them. They should take some responsibility for our interest rates. They should at least have the courtesy to back the Bank of England, rather than going occasionally around the back to brief against the Bank.

Fifthly, we need to know the truth about the Government's wish to enter economic and monetary union. Will they confess that all the other countries are going in at their exchange rate mechanism mid-rates? Does the President agree that no separate deal was negotiated for Britain, which must mean that what the Prime Minister brought home for British business was entry at DM2.95, our ERM mid-rate? Will the Government devalue the rate or negotiate a special deal? Will the Government tell business the truth: they let business down on this, as on everything else, and it has the opportunity only to enter EMU at a crippling rate?

Sixthly, will the Government set out proper, fair rules of disclosure for lobbying companies? Will they return to the old system, whereby the House speaks for manufacturing and exporting? The Government have a duty to listen, for a change, to what the House is saying. We do not want a culture whereby one must know someone or pay someone in order to make one's point. People must speak through their Members of Parliament and, above all, the Government must take the House of Commons seriously.

4.9 pm

The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett)

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: welcomes the measures the Government has taken to build an economy which is healthy and sustainable in the long term, including placing the control of interest rates with the independent Bank of England; notes that over the last 12 months investment has grown by 7 per cent., 14,000 manufacturing jobs have been created and the public finances have been put in order; welcomes the new culture of partnership in industrial relations which is developing within the framework of measures and proposals the Government is taking forward; urges the Government to continue its own productive partnership with both business and employees; and condemns the Opposition for its own record in government of allowing manufacturing to decline within a boom and bust economy of unprecedented proportions and actively and sustainedly destroying partnership and democracy in the workplace. From the outset, I must say that I fear that I am likely to disappoint the right hon. Member for Wokingham (Mr. Redwood), who asked me a string of questions about a string of issues—about which he has raised questions and made speeches elsewhere—that are not related to the subject of today's debate. Unfortunately for the right hon. Gentleman, I plan to speak about the subject of the debate, which the Opposition called. I got the distinct impression from the right hon. Gentleman's speech that, after he called it, he thought better of it, because he did not say much about the subject.

The motion tabled by the right hon. Gentleman and his hon. Friends creates the impression that they think that this is somehow year zero. They talk about the Government's creating a "boom and bust economy" and about the "growth of industrial unrest". I suspect that the second charge is thrown in just to make up the numbers, so it might be wise to deal with and dispose of it first.

Mention has been made of today's London Underground strike and a couple of other minor industrial disputes, which, of course, we regret very much. However, far from being a signal that the Government's policy is creating unprecedented unrest, tube and rail strikes were not only common under the previous Government but a feature of their last year in office. The denial of investment in rail and underground and the neglect of public transport as a whole eroded morale and trust, and that erosion is part of our inheritance from the previous Government.

We have already taken steps to reverse that investment backlog. In March, the Deputy Prime Minister announced radical and innovative proposals for a public-private partnership for the underground in which it will remain in public ownership but will benefit from the investment so long denied it. The fact that there is still concern about the long-term implications of the programme says more about that inheritance of mistrust and insecurity than it does about any flaws in the policies that the Government are pursuing.

The motion does not refer to the tube strike as such; instead, it expresses concern at the growth of industrial unrest in several sectors of the economy". In roughly the last year before Labour came to office, 1.3 million days were lost through industrial action. In the first full year of this Government, 183,000 days were lost through industrial action. That is seven times lower than the figure for the last year of the previous Government and about 40 times lower than the annual average for the 1980s. That is a record—in fact, it is the lowest figure ever recorded for days lost in industrial action, and the records go back to 1891. I will repeat that in order to avoid doubt: the records date back not to 1991, but to 1891.

Of course, it is perfectly legitimate for the Opposition to comment on and, if they can, make political capital from any industrial relations problems. However, it is a bit damn silly to talk about the growth of industrial unrest in what has been the best year of industrial peace for more than 100 years.

Mr. Gray

rose—

Mr. Tim Boswell (Daventry)

rose—

Mr. Gray

I am grateful to the right hon. Lady for giving way to me, rather than to my hon. Friend the Member for Daventry (Mr. Boswell). If the right hon. Lady has available a wealth of statistics stretching back to 1881, perhaps she would care to enlighten the House regarding the number of days lost through strikes in 1975, 1976, 1977, 1978 and 1979?

Mrs. Beckett

There were not as many as in the 1980s. As I have said, none of those issues in any way alters the fact that the Opposition tabled a motion deploring the "growth of industrial unrest" at a time when there is no evidence whatsoever to back up that claim. Indeed, that is typical of the motion as a whole.

Mr. Boswell

I am sure that the right hon. Lady would not seek to mislead the House, but, taking the years that I think were cited—I round the figures—the number of days lost was 6 million in 1975, 3.2 million in 1976, 10.1 million in 1977, 9.4 million in 1978, and 29.4 million in 1979. There is no figure comparable with that in the 1980s except for the 27 million days lost in 1984 with the miners' strike. I do not find her figures sustainable.

Mrs. Beckett

It would be superfluous to comment on that. The hon. Gentleman has shot himself in the foot by citing those statistics.

The motion talks of the Government creating a "boom and bust economy". Of course, the Conservatives are the experts. No one has ever been better qualified to talk about boom and bust than they: 18 years in power, unprecedented billions of pounds of windfall profits from the North sea—and they delivered the two biggest post-war recessions, separated by an unsustainable boom.

The motion also talks about the damage to manufacturing from the economic instability that the Opposition claim that we have introduced through high sterling and rising interest rates". Short-term interest rates are below the level at which they were held for the first 13 years of the previous Government's tenure of office.

The right hon. Member for Wokingham admitted, with even more clarity than previously, that the previous Government made mistakes in the 1990s when they entered the exchange rate mechanism. He commented that entry into the ERM was supported by Labour in opposition, although no one ever suggested that we should go in at the rate we did, which was the achievement of the former Prime Minister.

Mr. Bercow

Will the right hon. Lady give way on that point?

Mrs. Beckett

No.

The right hon. Member for Wokingham was careful to say that the Opposition apologised for that, and that only, as if it was the only mistake to which the Conservative party is owning up. Although he chose to concentrate solely on that period, during their tenure of office interest rates reached 17 per cent. in the early 1980s. At one point in that intensely difficult period, manufacturing output had fallen by nearly 20 per cent. In 1981 alone, 650,000 manufacturing jobs were lost. Between 1979 and 1983, a total of 1.25 million manufacturing jobs disappeared. That was in the early 1980s.

In the late 1980s and early 1990s, interest rates reached 15 per cent., manufacturing output fell by more than 5 per cent. and, in 1991 alone, another 400,000 manufacturing jobs were lost. When the Conservatives left office, manufacturing output had increased on average by only 0.5 per cent. in each of their 18 years; so, too, had manufacturing investment.

Miss Anne McIntosh (Vale of York)

Will the right hon. Lady give way?

Mrs. Beckett

Not for a second.

Britain had its first ever deficit on trade in manufactures—at least the first since the industrial revolution when manufacturing was invented in this country. As for jobs in manufacturing, my hon. Friend the Member for Huddersfield (Mr. Sheerman) pointed out that, when the Conservatives left office, there were 2.5 million fewer jobs than when they came into office. As for the level of sterling, not only did interest rates under the Conservatives reach levels twice as high as they are today, but sterling was at a higher level against the deutschmark than it is today. That was during the period when the shadow Secretary of State was a Minister at the Department of Trade and Industry.

Mr. Gray

As we are getting such a wealth of historical information, perhaps the right hon. Lady will comment on average interest and inflation rates under the last Labour Government. If she is unable to, I am certain that my hon. Friend the Member for Daventry (Mr. Boswell) will be happy to enlighten her.

Mrs. Beckett

I would not exactly call this history. After all, the Government have been in office for only 15 months. We are talking about the whole period of office during which the Conservative party was in power. As for the levels of interest rates and sterling, under this Government they are not at anything like the levels that they reached under the Conservative party.

The shadow Secretary of State claims that he acknowledges that and that he and his party have said, "Whoops, sorry," although it was not so full an apology that anyone but he can remember it. He says that we should put behind us their catastrophic record as stewards of manufacturing industry. No chance, I am afraid.

There is no doubt that we can dismiss with contempt most Conservatives' pretensions to speak on behalf of British manufacturing, but that does not mean for a second that I do not fully recognise and acknowledge the genuine concern felt and expressed by British manufacturers at what they see as the current erosion of their competitive position and the sharp anxiety that many feel about their order books, their export prospects and—if the worst comes to the worst—the consequences for employment. At every level, the Government are fully aware both of the importance of the contribution that manufacturing makes to our economy and of the pressures that some manufacturers are presently experiencing. I know that manufacturers' concerns are also heard and heeded by many of my right hon. and hon. Friends on the Back Benches.

Dr. Ladyman

My right hon. Friend makes a powerful case that the Opposition have had some sort of vision on the road to Damascus and are now supporting manufacturing. Does she, like me, recollect that, either when he was an adviser to Mrs. Thatcher, shortly before being elected to the House, or shortly thereafter, the right hon. Member for Wokingham (Mr. Redwood) appeared on television and, when asked about the balance of trade and manufacturing industry, replied, "It really isn't important; it really, really does not matter," and repeated those comments in respect of the balance of trade?

Mrs. Beckett

I am grateful to my hon. Friend, because I had not remembered that interview—at that time, I was not hanging on the right hon. Gentleman's every word as I do today. I can well believe that the remark can be attributed to him, because I am well aware that, at that time, that was the view not only held, but expressed, by the Conservatives.

Miss McIntosh

Will the right hon. Lady give way?

Mr. David Winnick (Walsall, North)

Will my right hon. Friend give way?

Mrs. Beckett

I shall give way to the hon. Lady, because she asked first.

Miss McIntosh

Can the Secretary of State give me some guidance? If a manufacturing company in the Vale of York wished to approach either her or a fellow Minister, would her door be open to receive a visit from that manufacturer—the Secretary of State for International Development has suggested that such a contact must come directly from a manufacturing company that is worried, perhaps about the minimum wage or about jobs being lost because of the recession—or would she insist that the company went through a lobbying company before being granted access?

Mr. Winnick

rose—

Madam Speaker

Order. I must ask the Secretary of State to respond to the hon. Lady before I call another hon. Member.

Mrs. Beckett

I beg your pardon, Madam Speaker. I sought to curtail matters for the convenience of the House. I would say to the hon. Member for Vale of York (Miss McIntosh) that, although I cannot undertake to accept every single invitation and request, my door is very much open to manufacturing industry—indeed, I do not wait for manufacturers to come to me; I go to them.

Mr. Winnick

There is indeed concern in the west midlands about the current state of manufacturing industry and we do not attempt to disguise that. However, is it not right to recall that when, under the previous Government, we twice went into recession, it was the west midlands which bore the brunt? From 1980 to 1982, large parts of the manufacturing areas of the west midlands were absolutely devastated, yet the Tory protest at the time was, to say the least, minimal. There are hardly any lessons to be taken from a party that caused so much damage to so many people in the west midlands, the heartland of manufacturing industry.

Mrs. Beckett

My hon. Friend is entirely right. I confess that my attitude toward those Conservatives who, at that time, spoke up on behalf of manufacturing industry is rather different from my attitude toward those who did not.

Mr. Bercow

Will the right hon. Lady give way?

Mrs. Beckett

I do not recall the hon. Gentleman being one of those who spoke up, so, if he will forgive me, I shall get on with my speech.

It is only fair to recall that many people, whether in manufacturing or elsewhere in the economy, recognise that a range of factors contribute to present circumstances. Those factors include the unaddressed inflationary pressures that we inherited from the Conservatives. In the context of the debate, it is important not to forget that, from December 1996, the Bank of England pressed the then Chancellor to raise interest rates and thus ease the inflationary pressures that the Bank saw building up. There is also the Asian crisis, with its inevitable impact on growth and exports; and the anxieties about the run-up to the euro.

All those factors contribute to the pressure on sterling; all those pressures contribute to the circumstances in which manufacturing industry finds itself; but none of them is the "creation", to use the word in the Opposition motion, of the Labour Government. The fact that what is happening to sterling is, in all likelihood, the result of a complex interaction of those factors means that dealing with that problem is not, as so many Opposition Members try to pretend, simply a matter of taking back interest rate control from the Bank of England or, indeed, of lowering interest rates. It is possible that if interest rates were lowered without regard for the consequences for inflation, as some Opposition Members appear to be demanding, we would increase inflationary pressure without necessarily achieving a lower exchange rate.

Mrs. Dunwoody

Might not that be a clear indication that we should not even contemplate entering the euro until we are sure that it is in our interests?

Mrs. Beckett

My hon. Friend will be aware that that is the Government's policy. We take the view that it is in Britain's interests to contribute, in so far as we can—as we sought to do during our presidency of the European Union—to a stable development of economic and monetary union and the euro, in case that is one of the factors that are putting pressure on sterling. However, we believe that, if the Government decided to recommend entry, which we would do only if we believed that it was in Britain's national interest, that decision should be put to Parliament and the British people.

Mr. Bercow

Is the right hon. Lady aware of the statement by the president of the Bundesbank, Mr. Tietmeyer, that, within a single European currency, it is an illusion to think that states can hold on to their autonomy over direct taxation policies"? Does the right hon. Lady agree with that statement, which is obviously important because of its implications for manufacturing industry? If she thinks that it might be vindicated, would the cession of sovereignty over direct taxation constitute for her a constitutional bar to Britain entering the European single currency? Yes or no?

Mrs. Beckett

It is rather silly to ask such a question and then ask, "Yes or no?" I was not aware of the statement that the hon. Gentleman attributes to the president of the Bundesbank, but if that is the view that he has expressed, I strongly, indeed violently, disagree. What is more, I suspect that the German Government disagree. That is their problem, not ours.

Mr. Tam Dalyell (Linlithgow)

My question is pursuant to that asked by my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), with whom I usually agree about everything in life. Does my right hon. Friend accept that, as we represent Motorola and the paper industry, which are desperate to enter a single currency, there are two views in the party on that subject?

Mrs. Dunwoody

At the very least.

Mrs. Beckett

My hon. Friend anticipates me. I was about to say that there are at least two views. I understand that there are particular industries where there is urgent pressure and a great desire for Britain to be an early participant in the euro and that, in other industries, the pressure exists without the same force. I can only repeat to my hon. Friend the Member for Linlithgow (Mr. Dalyell) what I said to my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), which is that the Government believe that the decision should be made by Parliament and the British people, only when it is believed to be in Britain's interests to enter a developing euro.

Dr. Ladyman

Does my right hon. Friend agree that, whether or not we ultimately enter the European currency, our motivation for economic policy should be the same? Our need for a stable competitive currency rate and stable low interest and inflation rates will be identical, whether or not we intend ultimately to enter the euro.

Mrs. Beckett

My hon. Friend is entirely right—those factors are in the interests of the British economy, and they are policies that the Government seek sustainably to pursue.

Before we embarked on an interesting diversion, I was talking about the possibility of lower interest rates and how they might impinge on sterling. Before I leave that point, it is right to remind the House that two thirds of the increase in sterling against the deutschmark occurred before the general election. That means that it was in no way the responsibility of this Government, and that it took place before interest rates had begun their recent rise, so it calls into question the suggestion that present exchange rates are fuelled solely by interest rate levels. The lesson, under Governments of either party, of politically driven exchange rate interventions is that it can have an effect, but that it is not necessarily or solely the one wanted or imagined.

The right hon. Member for Wokingham said that the problem was the pressure on savings, and talked as though an unprecedented decline in savings was exacerbating the problem. As I am sure he knows, that is nonsense. The savings ratio is running at some 9 per cent., which is near its long-run average and nowhere near the levels to which it fell under the Government of which the right hon. Gentleman was a member in 1988, when savings fell to 6 per cent. That is not relevant to the difficulties that some sections of manufacturing—it is not universal—may be facing.

The Government are not prepared to run risks or play games with the economy. We put control of interest rates in the hands of the Bank of England to signal that. Little could be more damaging to confidence than to reverse that policy, as some Conservative Members appear to demand.

Our extensive consultations with the business community before the election and since have produced a short but heartfelt list of what it feels is needed from the Government. That list is headed by a demand for stability in the management of economic policy, which the business community believes will contribute to economic stability. It also calls for consistency in overall policy making and for investment in skills, transport infrastructure and our science and engineering base. All that was heard, and none of it was heeded, by the Conservative party when in government.

However, in the 15 months during which this Government have been in power, not only the interest rate decision but the decision to set a sound framework for prudent, consistent and long-term reform of public expenditure have laid the basis for the policy stability that the business community seeks. The evidence that that is the right course lies in the fact that long-term interest rates today stand at 5.75 per cent.—the lowest level for 33 years.

Sir Peter Tapsell (Louth and Horncastle)

I am genuinely puzzled by the fact that Ministers repeatedly point to historically relatively low long-term interest rates as a sign of optimism, because most commentators regard them as a sign of anxiety that we are heading towards a recession. That is why long-term interest rates in Japan are only 2.5 per cent. and why, in the past six weeks, the yield from the long-term bond in America has fallen by 0.5 per cent., reflecting fears that the Asian crisis will have a knock-on effect. Low long-term interest rates are what happens when the markets think that a recession is coming.

Mrs. Beckett

I hear what the hon. Gentleman says, but I am not prepared to get into a great debate with him about the indications of low or high long-term interest rates. It is strange for him to complain that low interest rates are not a good sign, given that the motion tabled by the Conservative party complains about the threat to manufacturing as a result of the level of sterling, which, it claims, results from the level of interest rates.

Sir Peter Tapsell

I am talking about long-term interest rates.

Mrs. Beckett

Yes, I know.

As I was saying, the windfall tax, which the Conservative party opposed, has funded the start of the new deal for employment. The legislative changes being pushed through by my right hon. Friend the Secretary of State for Education and Employment and his team should foster not just more investment but higher standards from the nursery years through to higher education, which is the push to quality that Britain needs.

We are on the brink of an announcement about the outcome of the comprehensive spending review—the establishment of a three-year framework within which the Government will begin to deal with the backlog of under-investment and decay not only in education or the transport infrastructure, but in our science and engineering base. In each of those areas, an innovative approach to public-private partnership lays the foundation for modernisation and reform, which should deliver not only increased resources but better value for the investment made.

Earlier today, I announced a step change in science funding, to meet the challenge of a potential step change in scientific discovery and understanding. We believe that the human genome project has the capacity to bring about another giant change, not only in understanding, but in the implications for the quality of life, for our approach to health care and for industrial exploitation, which can flow from using the knowledge that that project will deliver.

Today, we have announced a £1.1 billion package secured over the next three years. There will be a £600 million fund for university laboratories, equipment and infrastructure, funded equally by Government and the Wellcome trust, £400 million in capital and current costs for research councils' new project funding, and a further £100 million from Wellcome towards the cost of a new high-intensity X-ray machine, not only to help keep the United Kingdom at the forefront of human genome research, but to contribute to many other research projects.

I do not suggest for a second that that money will ease the day-to-day problems that confront manufacturing companies in Britain, but it is a hugely important signal that, under the present Government, we shall not neglect that seedcorn investment on which, ultimately, our whole economy—and manufacturing in particular—depends.

Mr. Redwood

Will the Minister give way?

Mrs. Beckett

Certainly. I hope that the right hon. Gentleman can tell us that a Conservative Government would not seek to abolish such a fund.

Mr. Redwood

Has the Minister some advice for a manufacturer who, today, is looking at the figures and saying to himself, "If sterling and interest rates stay at this level or go higher for the whole of the next six months, I must close my factory, but, if there is relief in sight—if there is to be some improvement—it is worth clinging on"? Would she advise that manufacturer to cling on—or will her Government do absolutely nothing to help him?

Mrs. Beckett

Such a manufacturer will find no answer in the issues that the right hon. Gentleman has raised, most of which have no relevance whatever to him or her.

I am slightly sorry that the right hon. Gentleman could not find it in himself to be generous enough to welcome the £1.1 billion package that I have just announced for the science and engineering base. I would not attempt to second-guess the decisions that any manufacturer or industrialist must take over the next few months; all I can say to him is that, in terms of economic policy and supply side investment, the Government are laying the foundations for the type of long-term prosperity that can alone secure our economy and our manufacturing base, the neglect of which was such a feature of the Conservative party's record in office.

Mr. MacShane

Perhaps the right hon. Member for Wokingham (Mr. Redwood) has not welcomed that remarkable new statement—which, alas, there is no one in the Press Gallery to hear—for the following reason. At page 10 of the latest Library research paper on the economy we read that, in 1997, investment in our country, expressed in gross domestic fixed capital formation, was still 2.1 per cent. below the peak reached in 1989"— so the period when the right hon. Gentleman sat in government was the period in which we invested nothing in our economy.

Mrs. Beckett

My hon. Friend is entirely right. That was a feature of the Conservative party's entire time in office.

The announcement that I have made today is not the only sign that the Government have given that where we can work in partnership with manufacturing, we shall. Immediately after the general election, we set up the export forum to consider what steps lay within our power as a Government to help and support Britain's exporters, especially small and medium businesses. We reinstated specific support for trade fairs and seminars threatened by the Government who left office last year. Earlier this month, we established the national exporters database. We have introduced the export explorer service, to give small firms first-hand experience of export markets. Later in the year, we shall launch the new sales leads service, which nearly 1,300 companies have already applied to join.

Moreover, directly in manufacturing, in the past 15 months we have pledged £323 million of supportive investment into Britain's aerospace industry—substantially more than the amount that flowed from the previous Government over seven whole years.

We have secured inward investment in pharmaceuticals from Pfizer, with 1,000 more scientific research jobs in Kent, and from Jaguar, Vauxhall, LDV and Honda. In all those cases, investment is bringing more quality and skilled jobs to various parts of the UK. In addition, we have seen investment in jobs in IT, particularly in the east Midlands and Glasgow. All those investments are the fruits of partnership with this Government which look to secure our economy and our employment prospects in the longer term.

Mrs. Dunwoody

Will my right hon. Friend give way?

Mrs. Beckett

I will, but, if my hon. Friend and the House will forgive me, it will be the last time, as I am almost at the end of my remarks.

Mrs. Dunwoody

I am grateful. Will my right hon. Friend look carefully at the Export Credits Guarantee Department? I know that it is a difficult area where, because of past problems with particular countries, some contracts are being lost. I understand the difficulty and the reinsurance problems, but will she undertake over a longer period to examine closely what is happening in ECGD?

Mrs. Beckett

We are taking a careful look at the scope of the operations of the Export Credits Guarantee Department. As my hon. Friend knows, it is a high-quality operation which has had great successes. I recognise that there are those who would like it to stretch its wings a little more sometimes, and I shall bear my hon. Friend's remarks in mind.

It is only natural, when people are facing particular difficulties, for them to begin to blame the Government of the day—although not, I hope, for the weather or our sporting record, as the right hon. Member for Wokingham suggested. It is only natural for them to want the Government to do something, even though the specific action for which they call may neither identify nor address the underlying problems that they face.

It is right for a Government to take those concerns seriously and never to ignore or dismiss them, but it is also right for a Government not to take their eye off the fundamental long-term changes that, in the end are the only basis for sustainable and secure economic prosperity. That is what this Government are determined to do.

The petulance and fury displayed by the Conservative Opposition, trying to fire on all cylinders and certainly firing in all directions, adds nothing to the serious analysis or the resolution of Britain's long-term problems. They had the greatest investment opportunity in our long and sometimes glorious history, and they frittered it away buying short-term popularity at the price of continuing long-term decline. We and the House need no lectures from them. What we need is to continue to work to develop a new understanding and a new approach to making Britain more competitive. It is a task from which we will not be deflected, because it is a task in which the future of Britain requires us to succeed.

4.42 pm

Mr. David Chidgey (Eastleigh)

I am glad that the Conservative Opposition tabled the motion. It seems that they have finally recognised that creating a boom-bust economic cycle of high interest rates and wage and price inflation is not good for the economy. They are right to point out the damage being done to manufacturing industry by an unvirtuous cycle. However, rather predictably, they have begun to lose their way in addressing the problem.

I am sure the House would agree that the present Government did not cause the situation: they inherited it. However, that is no excuse for not recognising the problems visited on manufacturing industry and for not acting to correct them. Having given the Government some credit, perhaps I am now allowed to chide them a little.

It is clear that the Government are in danger of mismanaging the economic situation that they inherited. They have yet to send a clear message to the international community that they mean business when it comes to creating stability and investing for the long term. When they presented last year's Budget, they had the opportunity to dampen consumer spending through taxation—to damp down the side of the economy that was and is overheating. That would have removed the need for the interest rate rises that have increased the cost burden of debt management right across industry.

The pound, which is proving so attractive to overseas investors because of high interest rates, and whose strength is doing to much to damage the export sector, would be lower and would be pitched at a realistic rate.

Dr. Ladyman

rose—

Mr. Chidgey

I give way to the hon. Gentleman.

Mr. Deputy Speaker (Mr. Michael J. Martin)

Dr. Ladysmith.

Mr. Bercow

Dr. Ladyman.

Dr. Ladyman

Thank you. I am grateful to the hon. Member for Eastleigh (Mr. Chidgey) for giving way—to someone.

My understanding was that the Liberal party campaigned in the general election on the notion of putting 2p on income tax for various good works. Presumably the hon. Gentleman is arguing that that 2p on income tax would have dampened consumer demand sufficiently to make a significant rise in interest rates unnecessary. I would be surprised if any serious economist suggested that that would have saved more than half a percentage point on interest rates. How would the hon. Gentleman have dealt with that situation? Would he have carried on putting income tax up, beyond the 2p?

Mr. Chidgey

I share with the hon. Gentleman the problem of the mispronunciation of one's name. I often suffer from a similar problem, but I hope that he does not feel too flushed by the mispronunciation of his.

Mr. MacShane

Get on with the answer.

Mr. Chidgey

I shall indeed answer the question, as was so accurately said from a sedentary position.

The hon. Member for South Thanet (Dr. Ladyman) is wrong on several counts. He has not got his figures right with regard to our manifesto. He may not be aware of, or he may have ignored, a fully costed alternative Budget that we proposed when the Government proposed theirs. I recommend it to the hon. Gentleman. It will make interesting reading, and he may learn quite a bit from it.

The Government should have made an early commitment to join the EMU, which would have encouraged interest rates to fall, accompanied by a fall in the value of the pound. Instead, a combination of inflammatory rhetoric from the Conservative Opposition and indecision from the Government have led the pound to rise even higher.

The Government should not have adopted the self-imposed economic straitjacket of the Conservative spending limits. Taxes on consumer spending could have provided the levels of investment that are desperately needed to repair the damage that has been done to investment in education and training. The billions of pounds in surpluses that the Chancellor is building up in his war chest over the life of this Parliament could have begun the process of reskilling the work force and closing the skills gap that is doing so much to encourage wage inflation in the industrial base.

Mr. Bercow

Perhaps the hon. Gentleman will answer the question that the President of the Board of Trade ducked a few moments ago. If Dr. Tietmeyer, the president of the Bundesbank, proves to be correct, and entering the single European currency entails the cession of sovereignty over direct taxation policies, would that, for the hon. Gentleman and his party, represent a constitutional bar to joining the single currency?

Mr. Chidgey

It is the same question, and the same answer. That is a matter for the Germans to worry about. Clearly it is not the policy that we are pursuing.

Before I develop the policies for which we have long argued, I shall define the disease that is gnawing at the heart and vitals of British industry—the disease that the Conservatives failed to diagnose, let alone cure. It is widespread. It afflicts much of the British manufacturing sector. Recent announcements by some of our major manufacturers—Rover and Vauxhall—have merely served to highlight it. It is important to reflect on the views that they put forward in the press recently.

Both companies said that they were looking to move their components subcontracting from the United Kingdom to continental suppliers, because productivity is not high enough in the UK. Subcontracting is a misnomer, because, as many hon. Members who represent manufacturing-based constituencies know, the subcontracting part of the motor industry is the major part. Press comment that our major manufacturers are to seek supplies elsewhere has a fundamental effect on the economy of those towns and those industries.

Vauxhall and Rover are seeking to move their subcontracting to continental suppliers because productivity is not high enough in the United Kingdom—compared to that of German manufacturers, who have been prepared to take a long-term view of investment in tools and machinery. British firms still seem to be more inclined to rest on their laurels in economic good times and not invest in the future. They will lose if they do not take radical action now.

Dr. Ladyman

Will the hon. Gentleman give way?

Mr. Chidgey

I shall continue, if I may. The fewer interventions there are, the more opportunities there will be for other hon. Members to speak. Hon. Members should take that on board, as this is a short debate.

Even more worrying, at the time of its announcement and since, Vauxhall has made it clear that the high value of the pound was only one element in the package. Low productivity, which is the result of industrial short-termism and unwillingness to invest, was a more serious issue. For a Government who claim that the punishingly high value of the pound and high interest rates are a result of their preparedness to pursue a long-term anti-inflationary policy, the charge of short-termism in industry is serious; for a Government who have consistently set out a vision of developing a high-skill, high-wage economy—which I agree with, and which my hon. Friends support—losing valuable jobs to continental firms is hardly an auspicious start.

The culture in Britain has to change towards investment, or more jobs will be lost and more industries will join those that were killed off by previous Conservative Governments who sat on the Treasury Bench for those long years. That change requires a long-term strategy. If Ministers were listening to what I am saying, they might reply that they have been in office for only a year and have 18 years of Tory misrule to put right. I am not blaming the Government for the culture that they have inherited, but it is clearly their responsibility to introduce policies to change it. I listened with great interest to the remarks of the President of the Board of Trade. They were encouraging, but far more needs to be done if we are to put our manufacturing industry back on a sound base.

Liberal Democrat Members have long argued that making Britain competitive is not about economic dumbing down and competing on price in world markets. We cannot do that, and neither should we want to. We share the Government's view that we should aim to compete on quality, with the best in the world. For that reason, I look forward to the White Paper on competitiveness. I hope that it will propose realistic solutions to some of the most ingrained problems, which the Government have been elected to tackle.

It is perhaps symbolic that the Conservative Opposition decided to initiate the debate only two days before the announcement of the comprehensive spending review. The President of the Board of Trade gave us a little insight by putting her hand into the sweetie jar and pulling out a few interesting issues for us to suck on, but there is much more that we need to know. We can but hope that this long-awaited review will include a significant shift towards long-term planning in the industrial sector. The Liberal Democrats will judge the review on how much increased investment in education and training is provided. I know the battles that go on.

Mr. Brian Cotter (Weston-super-Mare)

Does my hon. Friend agree that the Engineering Employers Federation recently announced that engineers were having severe problems in meeting—and, indeed, quoting for—contracts, because of the lack of skilled personnel?

Mr. Chidgey

My hon. Friend makes a telling point. Lack of skills is a major problem in industry, and I shall set out what we need to do if we are to give industry opportunities to compete effectively.

There must be much greater investment in education and training. The minimum must be the right to two days a week in education or training for everyone aged between 16 and 18, and there must be an entitlement for everyone to have a period in education or retraining to reskill, at some stage in their lives: as industry develops, technology changes and skill requirements change, so we must change our work force to fit those requirements and to ensure that we do not have another skills shortage looming over us all the time.

We need to expand our higher and further education system, and we must repair the damage that was done under the previous Administration, but that means investment in quality education, not paying lip service to it by increasing numbers for inferior courses. We need a clear commitment to invest in training. If we achieved that, we could start to tackle the skills shortage and do more to calm wage inflation than would any proposal from the Conservative Opposition. Although taking the initiative on training would help to ameliorate upward pressures on wage inflation in the medium term, the Government must also act to remove some of the short-term pressure for further rises in interest rates.

There has been an interesting discussion between Labour and Conservative Members about how important or unimportant it might be for us to join the European single currency; however, let us consider the facts and what is happening in manufacturing industry. Hon. Members really must do something: the most recent survey by the Engineering Employers Federation suggested that, in the second quarter, the balance of engineering output declined to minus 7 per cent., the first time in five years that a negative has been recorded. That is the sharpest adverse quarter-on-quarter change ever recorded. Over the same period, the balance of export orders fell for the sixth consecutive quarter, to minus 25 per cent. The balance of domestic orders fell from plus 11 per cent. in the previous quarter to minus 12 per cent. this quarter. At the same time, employment in the sector fell by 12,000, and capital spending plans are weakening sharply, with a positive balance of only 4 per cent.

To add more information and to emphasise the point, the Institute of Directors business opinion survey for June showed that weak overseas markets are now considered by 42 per cent. of manufacturing industry to be a factor in the limiting of output, and 57 per cent. of directors cited a lack of orders and sales as the main problem. Optimism in manufacturing industry is running at minus 8 per cent., compared to plus 42 per cent. last time.

There are short-term actions that the Government can take to remove some of the pressure for further rises in interest rates. To reinforce the point, the principal action would be to dampen inflation by taxation of consumer spending to release investment for education and training.

The Conservative Opposition's motion raises concerns about industrial unrest and employee relations policy. Not only did the previous Government have some of the highest ever interest rates and inflation rates; towards the end of their term, as the President of the Board of Trade said, the trend in stoppages of work was spiralling upwards. According to Government figures, produced by the House of Commons Library, from the July labour market trends survey, 278,000 working days were lost in 1994, 415,000 were lost in 1995 and 1.3 million were lost in 1996. That compares to 235,000 days in 1997 and only 72,000 in the first quarter of this year. We know where the fault and the blame should lie.

Liberal Democrat Members believe in a constructive and engaged approach to industrial relations—from employers and employees—overseen by a Government without dogmatic attraction to one side or the other. I shall leave it to Labour Members to decide whether the Government have a dogmatic position or dogmatic attraction to one side or the other. Perhaps we shall find out in due time. Nevertheless, the Liberal Democrats broadly welcome the White Paper "Fairness at Work". We believe that the proposals offer a start to rectifying some of the wrongs done to industrial relations policy under the previous Administration. The White Paper must be developed, and we intend to focus on extending the Government's as yet unrealised promise of industrial democracy to all those at work in this country

Above all, the Government must tackle the crisis in manufacturing industry. They must give a clear commitment to the United Kingdom's entry into economic and monetary union and act to dampen down consumer spending. They must also release resources from their multi-billion pound war chest to provide the investment that is essential to closing the skills gap and to enabling industry to produce the best and compete on quality in the global marketplace.

4.58 pm

Mr. Denis MacShane (Rotherham)

I welcome the speech of the hon. Member for Eastleigh (Mr. Chidgey), because he is a chartered engineer, and is one of those rare beings in the House who has got his hands dirty in manufacturing.

Mr. Chidgey

I am grateful to the hon. Gentleman for giving way so early. On a point of information, not only am I a chartered civil engineer and mechanical engineer— I have got my brains and hands dirty—but my hon. Friend the Member for Weston-super-Mare (Mr. Cotter) runs a manufacturing company. Perhaps the hon. Gentleman was not aware that we on the Liberal Democrat Benches speak with a great deal of experience.

Mr. MacShane

Even if I were not aware of that, I sense that, as so often, the only effective opposition in the House is coming not from the two Conservative Members sitting on the Back Benches, but from hon. Members from parties below the Gangway.

As a lifelong supporter of manufacturing, I am delighted that this motion has been tabled. It allows me and any other hon. Members with a shred of intellectual honesty to place in front of the House the sorry record of the Conservative Government, who undermined, weakened and scorned the needs of manufacturing. By sheer chance, on Friday night I spent three hours with a group of representative employers from my constituency, which lies at the heart of the traditional manufacturing sector in the United Kingdom economy. It was a good discussion, and I shall put some of their points and comments on the record, because I want Ministers to consider what they had to say.

This debate will continue: it is not a fixed announcement of policy. There is a crisis about what kind of a nation we want to be. The fall in the manufacturing sector of our economy, which has been accelerating in the past 20 years, needs to come to a stop and, where possible, to be reversed. We have gone through the years in which, as the former Chancellor Lord Lawson said, it did not matter how people made a pound—whether it was by trading a pound or making a product. We have gone through the years when all that counted was the weightless economy. Just look at the contents of our homes, what is on sale in our shops, and the number of cars we drive. We live in an economy that is more weighty than ever.

I hope that Britain will start to make a little more of what we and the rest of the world consume. To achieve that end, we shall need a significant change in policy.

Mr. Boswell

Would the hon. Gentleman like to comment on events since May last year? Have the Government shown a greater sympathy towards manufacturing industry or the service sector? Which of those sectors has done better during that time?

Mr. MacShane

A culture inimical to manufacturing existed not just during the 18 Tory years, but for longer. Under the present Government, 14,000 new manufacturing jobs have been created in the United Kingdom. In my constituency, British Steel is taking people on, but it cannot make a decent profit because of the value of the pound. I shall come on to that, because these points need to be raised. But the difference is that only in Britain has it been the fixed and focused policy of the Government, when in the hands of the Tories, to do down the UK-owned and managed manufacturing sector.

Manufacturing may be different from the service economy, because, perhaps more than any other sector, it requires stability to plan for the future. Last week, I went to Bournemouth. I got up early, picked up some papers at the House of Commons and walked across Westminster bridge. I had not had breakfast, so I went into a typical part of the service sector: a cafe underneath Waterloo station. I asked for a bacon sandwich with brown bread. Two young girls were smoking and examining their fingernails. One of them eventually got up and told me that she did not have any brown bread.

I went next door to make the same request, but there was no one behind the counter—that is the service economy that the Tories created. Someone finally arrived, but there was no brown bread—bacon, yes; tea, yes; but no brown bread. I like my brown-bread bacon sandwiches.

I went into Waterloo station, where I saw a bagel stand. Three young men and women were sweating like dogs. They had six different types of bagel and a dozen different types of fillings, from Marmite to marmalade. They were working hard to produce what customers wanted. That is the service sector that Labour should be backing, and we should abolish the old Tory sector that could not provide clients with what they wanted.

Bacon sandwiches apart, cafes and bagel stands may come and go, but manufacturing requires stability in three areas: first, in the cost of its inputs and the price of its outputs; secondly, in the availability and cost of skilled labour; and thirdly, in the prospects for its markets. In the past years, we have known nothing but chronic, enduring instability in all three areas. Virtually all the present problems facing manufacturing—I do not deny that there are real problems—arise directly from the previous Government's irresponsible handling of the economy.

We may exclude the right hon. Member for Wokingham (Mr. Redwood), because he was not part of the previous Government during their last one or two years. However, before he became a Member of Parliament, he was one of the chief advisers to Mrs. Thatcher, and he participated in the culture of hostility to manufacturing that developed so strongly in the 1980s.

Mr. Redwood

I should like to correct the hon. Gentleman. I had no hostility to manufacturing then, and I do not have any now. I have been a model of consistency on this issue. The advice I gave included advice that would help manufacturing.

Mr. MacShane

The right hon. Gentleman reminds me of the general who reported back to the Roman emperor, who then said, "They created a desert and called it peace." The wipe-out of manufacturing in the 1980s—when the right hon. Gentleman was not an MP, but was an adviser to Mrs. Thatcher—is one of the industrial crimes of the century.

The real culprit, however, is not the right hon. Gentleman: it is the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who is not present. I think that it was the poet W. H. Auden who said that history sometimes forgets, but it never pardons. I do not know whether history will forget the previous Chancellor, but his party will certainly never forgive him. His flippant and irresponsible stewardship of the economy led to the Tory wipe-out at the last election.

As my right hon. Friend the President of the Board of Trade said in her excellent speech, 70 per cent. of the rise in sterling since May 1996 occurred under the Tories. The increase in the rate of money supply nearly doubled in the last year of Tory government. Interest rates were held down deliberately to maintain a pre-election boom. Fat use that did them, because the British people are much wiser than the Conservative party. There was no serious, sustained investment in manufacturing.

Mr. Redwood

Will the hon. Gentleman give way?

Mr. MacShane

May I finish my point first? The right hon. Gentleman was more than courteous in giving way to Labour Members, so I shall repay his courtesy.

As the hon. Member for Eastleigh said, under the Tories there was no investment in training. There was a decrease in the amount of fixed capital formation—an absence of investment essential to any successful manufacturing economy. Short-termism was rampant: dividend payments were maintained at all costs, even at the expense of investment, training and jobs.

Mr. Redwood

For the sake of accuracy, I should point out that the money supply did not double in the last year of the Conservative Administration, as the hon. Gentleman suggested. Indeed, it did not double even in the last five years of that Administration.

Mr. MacShane

I am terribly sorry, but the right hon. Gentleman did not listen to me. I said that the rate of increase in the money supply nearly doubled. If he wants to check the facts, I refer him to an excellent House of Commons publication on GDP indicators.

Mr. Bercow

Will the hon. Gentleman give way?

Mr. MacShane

Perhaps the hon. Gentleman would let me make a little more progress.

I want to refer to the talks that I had with employers in Rotherham last Friday. It was a varied group of men and women. Rotherham has a combined chamber of commerce and training and enterprise council, which is also associated with the business link. One organisation represents about 75 per cent. of the employed people in Rotherham. I commend that model to other parts of the country, because it concentrates the voice of employers.

At what was, in effect, a seminar—I hope that similar meetings take place in the Treasury, the Department of Trade and Industry and, indeed, the counsels of the Opposition parties—the question was asked, should we raise taxes? I think that the hon. Member for Eastleigh suggested that we should. In fact, a number of taxes on consumption, such as insurance premium taxes and the tax on cigarettes, have gone up; but the response of those selling goods in Rotherham was, "Hang on a second: we need to maintain demand."

What about interest rates? My good friend Brett Ainsworth, who runs a metal company that has been successful on both the domestic and the international scene, said that the Chancellor, or rather the Monetary Policy Committee, should lower them by a quarter of 1 per cent. I must say that I am not entirely sure that a quarter of 1 per cent. is all that significant.

As inflation remains a worry for the men and women to whom I spoke, I asked them about the minimum wage. "We welcome it," said one hotel keeper. "It will solve the problem of the low-wage competition that has been undermining us."

One issue that bubbled up surprised me, because I do not associate South Yorkshire with the keenest of views on Europe. There was a feeling that Britain was not being clear enough, as a nation—no blame was attached to any particular Minister or party—about European monetary union. Those people respect and appreciate our Government's view that ultimate democratic control rests in the hands of the people through a referendum—and, having raised the issue in my maiden speech four years ago and subsequently written an article in The Times arguing in favour of such a course, I am wholly behind it.

Mr. Bercow

Will the hon. Gentleman give way, on that point?

Mr. MacShane

On that point, yes.

Mr. Bercow

The hon. Gentleman, who has been present throughout the debate, will know that I have twice asked a simple question, to which I have not received an answer. He has a well-deserved reputation for clarity and consistency, and also for being strongly in favour of a single currency. If, as Dr. Tietmeyer believes, the single currency involves the cession of sovereignty over direct taxation policies, is that objectionable or acceptable to the hon. Gentleman?

Mr. MacShane

If the hon. Gentleman sends me the quotation from the good Professor Tietmeyer—

Mr. Bercow

Doctor.

Mr. MacShane

All professors are doctors in Germany. It is not possible to get such a job without a doctorate.

If the hon. Gentleman sends me the quotation from the good Professor Herr Doktor Tietmeyer in the original, I will check it and send him a reply in English, if that would be helpful.

What, then, needs to be done to secure the stability that was the primary demand of the employers in manufacturing and other sectors to whom I spoke in Rotherham? I believe that the Chancellor was right to set up the Monetary Policy Committee, and I said so before the election. I think it remarkable that our country did not adopt such a course years ago, because—for social democratic Netherlands, or capitalist United States—independence for the central bank is a given. The fact that, when in power, the Opposition baulked at that decision shows their lackadaisical approach to policy making.

I would, however, like the Monetary Policy Committee to be more representative of the nation as a whole, and in particular of industry. I do not doubt the intellectual ability of its members, or their desire to serve the national interest as they vote each month on the setting of interest rates; but I see no face and hear no voice from industry, and observe little representation from the country in general outside the golden triangle of Oxford, Cambridge and Islington.

The MPC might like to hold some of its meetings in other parts of the country. It might like to come and meet the employers to whom I talked last week. Having done so, it might of course hold to its decisions—that is its affair—but those who make the decisions in the Bundesbank and the American Federal Reserve are located in the regions and far-flung corners of those two countries, at least, and report back faithfully. I do not think that the needs of manufacturing have been reflected in the MPC' s decision.

It may well be necessary to look again at the MPC's mandates. The United States Federal Reserve is charged, under the appropriate Act of Congress, with developing a monetary policy commensurate with the economy's long run potential to increase production, to promote the goals of maximum employment, stable prices and moderate long-term interest rates". That is a heck of a package to discharge, but it certainly involves a bit more than the bearing down on inflation which—judging by its minutes—is the MPC's main obsession.

One reason why the American economy has been so strong in the last 10 or 12 years is the stability of interest rates, money supply and much of the value of the dollar—although it has been zig-zagging as a result, for instance, of the Asian crisis. American manufacturers have been able to borrow and sell, knowing what they will get back in a year or two—knowing the price of the money that they borrow in order to invest.

By contrast, under the Conservatives—and, frankly, Governments of the 1970s: I am sick and tired of this absurd game of ping-pong—we had a yo-yo economy. Interest rates, the value of the pound, capital formation and prices went up and down, up and down. We have been living in an Alton Towers rollercoaster economy, in which it was impossible for manufacturers to invest.

We have a real problem with pay. You were not in the Chamber at the time, Mr. Deputy Speaker, but earlier I had some fun at the expense of the shadow President of the Board of Trade and his new job with Murray Financial. He was honest, and revealed to the House that he is earning £12,000 a year in that job.

Mr. Deputy Speaker

Order. I think that Madam Speaker made a ruling on that. We must keep to the subject of the debate.

Mr. MacShane

I was actually praising the right hon. Gentleman—

Mr. Deputy Speaker

Order. There is no need to praise; just keep to the subject.

Mr. MacShane

It is the first time, Mr. Deputy Speaker, and I expect it to be the last—but, if I cannot even praise where praise is due, I will pass on.

Large pay increases awarded to themselves by those with the power to do so are having a very negative impact on pay pressure within the economy. It is impossible to open a newspaper, the Daily Mirror, The Times or The Guardian, without reading about someone somewhere—I will not go through the list—awarding themselves large pay increases detached from productivity, unit labour costs and unit prices. Until that problem is tackled, instability will continue.

I was delighted by my right hon. Friend's announcement of a £1.1 billion investment in science. I hope that lifelong learning, the university of industry and the tax incentives for research and development, which are under review, will come to fruition.

It is crucial, if we are to make a success of the manufacturing economy, never to be in the position of a Labour Chancellor some 50 years ago. When the Government of national unity collapsed in 1931, different decisions were made. Philip Snowden said, "No one ever told us we could do that." I urge Ministers to bear that in mind. We must be flexible. The last Government were not flexible, and the official Opposition have offered nothing today. I am still waiting for one speech from them that contributes anything positive to the debate.

Mr. Redwood

There were six points.

Mr. MacShane

None of those points was relevant to my constituency, or to the needs of the manufacturing economy.

I wish Ministers well. This is a huge subject. We will have to come back to it, but, if our country does not reverse the Tory years of anti-manufacturing economic policy, heaven help us all.

5.19 pm

Sir David Madel (South-West Bedfordshire)

That was a very interesting speech. In fact, I prefer the speeches of the hon. Member for Rotherham (Mr. MacShane) to his interventions. I particularly noted his comment that, if the Monetary Policy Committee had different people on it, it might come to different decisions. Conservative Members would be less agitated if it did come to different decisions. My short speech will contain something about what the committee should do, but I could not resist starting my remarks in that way.

The motion is in two parts, and I wish to say a little about both, but, first, I wish to thank the President of the Board of Trade, her Ministers and the civil servants for the way in which they listened and acted in response to the joint appeal, from management, unions and all of us who are concerned for industry in Bedfordshire, about the future of the Vauxhall car plant in Luton. We have come through another period of great anxiety about south Bedfordshire's industrial future. If the right economic policies are pursued, because of its history of vehicle building and component manufacturing, our area can still become the Detroit of the United Kingdom, with all the economic advantages that that will bring—but it will need the right economic policies.

Mrs. Louise Ellman (Liverpool, Riverside)

Will the hon. Gentleman give way?

Sir David Madel

I have only just started, but I shall give way.

Mrs. Ellman

Will the hon. Gentleman contrast the action of the President of the Board of Trade to which he has just referred, with the action that was taken by the Opposition when they were in government? In 1993, Leyland DAF collapsed, putting at risk thousands of jobs in truck manufacture. In Lancashire, when appeals were made to the then Secretary of State for Trade and Industry, he stated that nothing could be done. However, Labour-controlled Lancashire county council's economic development agency worked with the private sector and together they invested in the successful Leyland Trucks.

Lancashire Enterprises continued to develop the 200-acre site, where there are now over 2,000 jobs in 45 manufacturing companies, none of which would have been there if anyone had paid any attention to the statements by the then Secretary of State for Trade and Industry. Will the hon. Gentleman contrast what the Conservatives did then with what—

Mr. Deputy Speaker

Order. Sir David Madel.

Sir David Madel

I could take much time in the House debating truck manufacturing, truck production and what has happened in Dunstable, where we have lost all truck production, but I will say this to the hon. Lady: I have always believed that, in 1986, if the General Motors-Leyland Trucks-Rover deal had gone ahead, which some of us wanted, there would have been a future for Dunstable in vehicle building. Alas, there is no vehicle building there now. We are trying to put that right.

One of the reasons why that deal did not go through was that some hon. Members started shrieking idiotically about the possibility of the stars and stripes appearing on the Land Rover and Range Rover bonnet. Who owns Rover now? I do not think that I shall take the argument any further. However, if the hon. Lady is talking about what should have been done about truck manufacturing and whether different policies should have been pursued, we are in agreement, especially as Dunstable was badly affected.

Mrs. Ellman

Will the hon. Gentleman give way?

Sir David Madel

I shall, but other hon. Members wish to speak. I hope that the hon. Lady will be brief.

Mrs. Ellman

rose—

Mr. Deputy Speaker

Order. The hon. Lady has to make a brief intervention.

Mrs. Ellman

The point that I am seeking to make is that, in 1993, the Government of the day refused to act, but action was taken by a Labour-controlled local authority, which resulted in the saving of truck manufacture in Lancashire and of thousands of manufacturing jobs in Lancashire and beyond.

Sir David Madel

The point that I am trying to make is that, in 1986, when there was a proposal for a General Motors-Leyland deal, the Labour Opposition kicked up a terrible row. One of the consequences was that, eventually, Dunstable lost all its truck production. I know that we have just had Wimbledon. We could say "30 all" on that. If the hon. Lady will excuse me, I must move on.

As I have been talking about Vauxhall, I wish to make one point about the speech of the hon. Member for Eastleigh (Mr. Chidgey), the Liberal Democrat spokesman. His remarks were a bit downbeat and not very encouraging about Vauxhall. Do not worry: the new Astra productivity, production and quality in Ellesmere Port are just as good as on the continent. If they were not, 1,000 extra jobs would not be going there, so I hope that the Liberal Democrats will not mislead the country on economic conditions locally. They certainly misled people in Bedfordshire in 1986.

As I said, I am grateful for the help that the President of the Board of Trade gave us on the future of the Vauxhall plant at Luton. However, I hope that she has already done a further thing to help us: I hope that she has made strong representations to the Deputy Prime Minister on the White Paper on roads, which will soon be with us. We in Dunstable and Luton urgently need certain roads for our improved infrastructure. That is vital for industry, for employment and for future employment.

I hope that, having helped over Vauxhall at Luton, the President of the Board of Trade will be able further to help us with getting those new roads built, which are vital for our local industry. We cannot have industrial and employment policy in Bedfordshire decided by the antics of Friends of the Earth. As a constituency Member of Parliament, I am here to represent my constituents and, in view of the history of my constituency and what we have been through, that means above all fighting endlessly to get a more secure employment base.

In view of what has been said, I assume that DTI Ministers are getting increasingly anxious about what is happening to the manufacturing sector and about the policies pursued by the Monetary Policy Committee. Last Friday, there were three quotations in The Times from three people who come from entirely different wings, if you like, of the political spectrum, on the present policies of the committee. My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), a former Chancellor of the Exchequer, said in criticising the committee: The way you cause bust is that you carry on tightening policy when the economy is already going down. The Engineering Employers Federation said: We would urge the MPC as soon as possible to signal that interest rates have peaked and that the next move will be downwards. Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, which has many members in Bedfordshire, said: The recession will continue until the Bank ends its war of attrition against manufacturing industry. I agreed with quite a bit of what the hon. Member for Rotherham said about how the Monetary Policy Committee could become more involved in industry. I think that industry feels that it is simply not getting its message across to the committee. In fact, the committee might invite the President of the Board of Trade and some of her Ministers to sit in on some its meetings. It is the committee's duty to become far more heavily involved in the worries and needs of industry, and to pay far more attention to industry's view, rather than ale-house gossip in the City.

People in industry are being pushed to their absolute limits on the factory floor to secure export orders and, once they are secured, to ensure that they are delivered on time. I look to the MPC to start to work with the grain industry, rather than giving the impression of working against industry.

On industrial relations, I should like the Government to take a leaf out of our book and leave many things as they are. The change of Government was a year ago. There was a change of Government in 1951, after six years of a Labour Government. In moving the Loyal Address, the then Prime Minister, Mr. Churchill, said: What the nation needs is several years of quiet, steady administration, if only to allow Socialist legislation to reach its full fruition."—[Official Report, 6 November 1951; Vol. 493, c. 68.] I should like to turn that around: what the country needs is several years of quiet administration, to allow Conservative trade union legislation to reach its full fruition, rather than pulling it about and starting to change it around. This country does have greater industrial stability, and I hope that the Government will make a gesture in that way.

As my right hon. Friend the Member for Wokingham (Mr. Redwood) said, however, the motion mentions industrial unrest in several sectors of the economy". There is one sector in which matters have not improved but become worse in the past 12 months. From April 1997 to April 1998, just over 30 per cent. of all days lost were accounted for by stoppages in the transport, storage and communications sector, predominant recent stoppages on London Underground and Railtrack. The biggest single cause of action was pay—wage rates and earnings levels—followed by disputes over manning and works allocation.

There must be a way of achieving industrial peace in the railway industry. I cannot think of any other industry in which work conditions have improved more since the war. In 1945, the industry had steam trains, coal had to be shovelled and there were many difficulties. An enormous effort has been made to improve industrial conditions in the railways. The Government, in their heavy emphasis on greater use of public transport, are creating an atmosphere in which people entering the railway industry should be able to look forward to steady and secure employment. Somehow or other, we have to transform the atmosphere in the railway industry.

Since the war, there have been some remarkable breakthroughs in industrial relations—one of the best of which was the productivity agreements, in the 1960s, at the Fawley oil refinery, near Southampton. A whole range of improvements in that industry followed the agreements.

Mrs. Dunwoody

If the railway industry was able to offer its members the pay rates that are common in the oil industry, many railway men and women would be highly delighted with their jobs.

Sir David Madel

The hon. Lady and I have discussed the railway industry in the Select Committee on Transport, on which I was pleased to serve when she was Chairman. If I may develop the argument a little more, I think that she will see what I am getting at.

I am convinced that the railway industry and management can draw on good practice in other United Kingdom industries, to move towards better industrial relations. I am convinced that in that industry we can move, by negotiation, to single-union recognition, no-strike clauses and three-year wage agreements. Although it will not be done overnight and it cannot be forced through, there is sufficient experience in other parts of UK industry to show that it can be done, although it will take time.

I tell the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) that thousands of my constituents now depend—and even more of them will come to depend—on peace in the railway and tube industries to get to work. Jobs in the industry should become ever more secure. It is the challenge of management and unions to make industrial peace happen, and to move to the type of industrial peace that exists in many other sectors of UK industry.

One of my worries about the Government is that we have a restless Prime Minister and a restless Cabinet, always looking for things to do. That is not the best way to govern the United Kingdom. The best way to govern this country is—

Mr. MacShane

To do nothing.

Sir David Madel

No; it is to deal with matters as they arise. In this debate, we are talking about a problem that has arisen—the plight of manufacturing industry. I do not think that there are enough signs that the Government are responding positively to our worries about that industry.

I remind Labour Members that every Labour Government we have ever had left office with unemployment higher than when they took office. The way that the Government are going about matters, the same will happen again—I fear that history will repeat itself. If that happens, where will the welfare-to-work programme stand?

5.33 pm

Dr. Stephen Ladyman (South Thanet)

We have had an interesting debate, in which some hon. Members, including the hon. Member for South-West Bedfordshire (Sir D. Madel), seemed to argue—it is the first time that I have heard such an argument in the House—that the Government should not try to be proactive, but sit back and wait for events, to which they should react. I strongly suspect that the Government would soon be criticised by Conservative Members if they were to take that advice.

We heard an interesting speech from my hon. Friend the Member for Rotherham (Mr. MacShane), who made a powerful case on several matters—not least on brown-bread bacon sandwiches. I hasten to add that he made that case without having to resort to lobbyists or any outside agency.

The hon. Member for Eastleigh (Mr. Chidgey) made an interesting speech, on which I should like to focus for a few moments. His thesis was that the Chancellor should have raised consumer taxes to take the heat out of the economy. There is no question but that some money has to be taken out of the economy and that increasing interest rates is currently the main mechanism of doing so. One aspect of the monetarist thesis that now seems to be generally accepted is that a major factor in increasing inflation is money entering the economy more rapidly than goods to "absorb" that extra money. Consequently, the extra money has to be "sopped up" by inflation and increased prices. The hon. Gentleman therefore seemed to be agreeing with the thesis that removing money from the economy is a good way of controlling inflationary pressures.

The mistake made by the hon. Member for Eastleigh was to suggest that that extra money should be returned to the economy in immediately increased public sector spending. Such spending would not produce the downward effect on inflation that he seemed to advocate. Although he recommended that we spend the extra money on valuable projects that I agree require further investment, the economic circle could be squared only if he were to propose that we not only increase consumer taxes and spend that tax revenue on good works, but increase interest rates—exactly as has happened—or cut public sector expenditure in other spheres. If such action was not taken, increased public sector spending would not achieve the effect on inflation that the hon. Gentleman desires. That is the fallacy in his argument.

Mr. Cotter

As my hon. Friend the Member for Eastleigh (Mr. Chidgey) has left the Chamber for a moment, I should like to defend him. We have proposed a balanced Budget, and to pick out one aspect of it without considering the others is not to consider the whole.

Dr. Ladyman

I am going only by what the hon. Member for Eastleigh said in his speech—I cannot do more than that. I confess that I have not read in great depth the Liberal Democrats' proposed Budget, but, even if it is a balanced one, without increasing interest rates it would not serve the necessary purpose of reducing inflation. The Liberal Democrats are therefore not offering any proposals to end the Chancellor's dilemma, in which—people generally agree—interest rates, and consequently the pound, are too high.

Mr. Cotter

As I said, we have a complete policy. It would be wrong to try to deal with that policy in a short intervention. However, a part of our proposals on making progress on lowering interest rates is an early single currency timetable.

Dr. Ladyman

I shall return to the single currency issue later in my speech. A belief that I have propounded many times is that in the House we could do with a lot more agnosticism about the single currency. A few hon. Members are absolutely wedded to the idea of entering it, and fewer hon. Members are wedded to the idea of never going in. I think that we need a little more open-mindedness by all hon. Members, so that we can judge what is really in the United Kingdom's best interests.

The right hon. Member for Wokingham (Mr. Redwood) has left the Chamber. I was delighted to hear his—as I said earlier in the debate—almost damascene conversion to the cause of manufacturing industry. I have absolutely no doubt from the performances that he gave on television—when he was an adviser to Margaret Thatcher, before his election in 1987, as he was beginning to climb the steps of promotion in the Conservative party—that he was not being helpful to manufacturing industry.

The quotation to which I referred in my earlier intervention was absolutely accurate. The right hon. Gentleman said that he did not consider the balance of trade significant and that it should not be used as an index of whether the economy was going in the right direction. Therefore, I am delighted that he now supports manufacturing industry.

Today's debate shows that economics is extremely complicated. As the Conservatives failed to understand that in 18 years in government, it is unlikely that they will have learned to do so after 14 months in opposition. One matter on which we all agree, but which the Conservatives appear to be trying to forget, is that at the end of the day inflation is the company killer. It kills exports and will ultimately damage the prosperity of the United Kingdom, so we have to get it out of the system.

I acknowledge some fault on behalf of the Labour party. Perhaps previous Labour Governments did not realise quickly enough the danger of inflation and the damage that it can inflict. That failing was shared by the Conservatives for a considerable time, but at least we have grasped that now. We realise that, once inflation gets into the system, it puts prices up for ever. It cannot be reversed a few months later. However, if it is necessary to increase interest rates to get inflation out of the system, at least they can come down again. In the long term, they are less harmful than inflation. We have to set ourselves a target in respect of inflation. Deep down, that is the view of all industrialists and those in the manufacturing sector who are currently struggling.

I have received representations from manufacturers in and around my constituency about the effect of interest rates and the high pound. I share their concerns, but in the long term, inflation is what really hurts them. I believe that they share my objective of getting it out of the system.

As everyone is aware, my right hon. Friend the Chancellor of the Exchequer set up the independent Monetary Policy Committee to set interest rates. Let us speculate for a moment what would have happened if that committee did not exist. The Chancellor would have received the same data and the same advice. Presumably he would have had the same motivation as the Monetary Policy Committee, so it is likely that, at least originally, the same decisions would have been made. There might have been differences in the interpretation of the data, but broadly the same decisions would have been taken.

Sir David Madel

One hopes that the Chancellor would not do what the Monetary Policy Committee has done in every decision—it always over-corrects.

Dr. Ladyman

The hon. Gentleman is absolutely right. Perhaps the Chancellor would have done things slightly differently. In the long term, however, my fear is that, when the going got tough, the Chancellor would ultimately have done what Chancellors have always done, and under-corrected. If that was the case, he would not have increased interest rates when that was necessary. There was considerable evidence of that towards the end of the previous Government's period in office. Although there was clear information about the inflationary pressures in the economy, the Government did not increase interest rates as quickly as they should have done.

Mr. Boswell

The hon. Gentleman is making an interesting speech. Does he agree that the essential difference is that, when there is no independent Monetary Policy Committee, the Chancellor alone is responsible for those decisions both to the House and ultimately to the electorate? Under the present arrangements, the responsibilities are confused and to some extent deniable.

Dr. Ladyman

I do not accept that at all. Responsibility for decisions by the Monetary Policy Committee ultimately lies with the Government. The Government must be prepared to say, "We set up the mechanism, so we shall take responsibility for it." I do not accept the argument that responsibility is in any way diffused.

There is, however, a growing danger in respect of the Monetary Policy Committee, which I would ask the Chancellor and his ministerial colleagues to bear in mind. The committee has to focus only on the target that the Government have given it. During various dinners and meetings, I have spoken with at least four members of the Monetary Policy Committee. They were absolutely focused on the target that the Government set them—the inflation target. That was absolutely right. They said several times, "We cannot look at other matters. We cannot consider unemployment or sterling, because we have to focus on meeting the Government's inflation target, as that is the only task that the Government have set us." Now that the Monetary Policy Committee has reached the centre of economic debate, my concern is that some of its members may now try to act as quasi-Chancellors, by making political judgments and considering economic factors other than the target that the Government have set them.

Let me use an analogy. I was once given a flying lesson as a birthday present. When the aeroplane was coming in to land, the instructor explained the process of getting back down to terra firma without an almighty bang. Basically, one has to set the flaps and prepare the aeroplane for landing before slowly reducing speed. At the same time, one has to adjust the position of the nose of the aeroplane so that it remains level. He said, "It is very complicated doing everything at the same time, so I shall adjust the engine speed while you keep the nose of the aeroplane up. You focus on doing that." Because he had taken the other factors off my shoulders, I was able to focus on that one task, so the aeroplane landed safely.

In many ways, the Government have reached exactly that arrangement with the Monetary Policy Committee. They have set the target. The Government have taken the political and economic decision that inflation should be 2.5 per cent. and have given the Monetary Policy Committee one tool with which to achieve that target—interest rates. So long as the Monetary Policy Committee focuses on that target, the Government will know that, by hook or by crook, the 2.5 per cent. inflation target will be met, and they will be free to concentrate on the rest of the economy. The political responsibility, however, remains with the Government as they set the target. As I said earlier, if the Monetary Policy Committee attempts to broaden its target, there will be problems if it comes into conflict with the Government.

Although there may be some short-term problems, in the long term the Government's policy will benefit manufacturing industry. Although increased interest rates and a high value of the pound may hurt in the short term, they will be worth it if they get inflation out of the system. We have to look for some short-term ways to help manufacturing industry during that process. The Government must make sure that it really is short-term pain and that it is over as quickly as possible. If the Monetary Policy Committee were in any way inclined to listen to my advice, I would encourage it to over-correct. Frankly, the quicker it is over with, the sooner interest rates will come down. We have to aim for stability.

We have had a brief debate about monetary policy and the European currency. Let me reiterate what I said in an earlier intervention. Low interest rates, low inflation and a competitive sterling are essential regardless of whether we join the European currency. I do not need to make up my mind about the euro until after the next election, when we can see what lies before us, and I justify my agnosticism on the ground that, whether one wants to enter the currency in the next five minutes—which I believe would be foolish, given current circumstances—or whether one is determined never to enter it, the economic targets that one sets should be identical.

Mr. Cotter

Does the hon. Gentleman agree that many people think that, if we committed ourselves to joining the single currency—or if we actually joined it—we would ensure low interest rates? To be agnostic is not very realistic.

Dr. Ladyman

I do not accept the argument that interest rates would magically fall if we announced that we were going to join the single currency tomorrow. It is far more likely that sterling and interest rates would be pickled at the levels that applied when we made the announcement, and there would be no further movement. Interest rates, inflation and the value of sterling must fall before we can join the euro.

To help manufacturing industry, we need to establish stability and—to use the Prime Minister's much-vaunted expression—to end boom and bust.

We need to continue to open up markets and to encourage the European Union to take the necessary steps to bring the east into the open market, although that can be financed only through a dramatic cut in the amount that is spent on the common agricultural policy.

We should also consider the grant aid that we provide to industry. There is an anomaly in the way in which we give grants to attract new industry into the various EU countries. The EU limits the amount that Governments can put into a new project to 30 per cent. of the capital cost, but it does not limit what non-governmental organisations can put into the pot. In France, for example, local authorities, chambers of commerce and others typically put in money over and above the Government's 30 per cent. of the capital cost, in the form of free factories or tax breaks to the inward investor for the foreseeable future. That creates an unlevel playing field.

The same happens in this country. In Wales and Scotland, development agencies can put money into the pot, as that money is not considered to be direct Government funding. My constituency is 80 per cent. in Thanet, which has full assisted area status, but we still find that we cannot compete with areas that receive extra money. There would be considerable savings if the EU limited the total investment from public sources in any new enterprise to 30 per cent. of the capital cost. Alternatively, grant aid could be made available only to inward investors from outside the EU, so that EU money is not used to fund companies that move round within Europe.

We should also consider grant aid for training. The Government's proposals on training assistance and on lifelong learning, together with the additional training money from the new deal, are essential in the short term to improve manufacturing industry.

I think that I am right in saying that, in the past few months, only one significant manufacturing company has gone bankrupt in my constituency. It did so not because of the high value of sterling—it traded only within the United Kingdom—but because of its cash-flow problems, which arose because larger companies had not paid their bills on time. That is why the Government's initiative on the late payment of debt is so important.

The right hon. Member for Wokingham said that one way in which to remove money from the economy would be to encourage savings—I entirely agree, which is why I believe that the Government's proposals on individual savings accounts are so vital. However, I do not know how he squares that with the fact that he seems to be encouraging building societies to demutualise, which should be complete anathema to someone who wants to encourage savings.

We must also create a proper framework for industrial harmony. The Government's policies on the minimum wage and fairness at work are vital to that; they will allow industrialists and manufacturers to plan for the future and to organise and manage their companies appropriately. Conservative Members sometimes seem to have spent too much time in boardrooms; if they had more experience of management below the level of the boardroom, they would know the importance of good industrial relations and appropriate trade union representation in the workplace.

We must ensure that we invest in industries in which we can really win. Britain has demonstrated that it leads the world in the biological, chemical, pharmaceutical, biotechnological and information technological sectors—other countries cannot compete with us—so I congratulate my right hon. Friend the President of the Board of Trade on announcing today a further £1.1 billion for science and technology.

Far from ignoring manufacturing and the problems that have been highlighted by hon. Members on both sides of the House, the Government have done a tremendous amount to help. They do not overlook the problems that have arisen; they are working on what needs to be corrected. They have certainly done more in the past one and a quarter years than was done in most of the years of the previous Conservative Government.

5.56 pm

Mr. Richard Page (South-West Hertfordshire)

I apologise to the House and to both Front-Bench spokesmen for being unavoidably detained and unable to hear the opening contributions.

This debate has arisen because the Chancellor wanted to hit the ground running. He has managed the first part; he has certainly hit the ground. The problem is that, when a Chancellor hits the ground, that is not a solo performance—a few million others join him in the crash.

That is not new, of course. I remember that, when I first came to the House some 22 years ago, Lord Healey, then Chancellor of the Exchequer, had run up inflation to more than 24 per cent. The dead were unburied, the rubbish was piling up in the streets and the International Monetary Fund had to come in like the cavalry rescuing a banana republic.

To show that I have no political bias, I should add that I remember that Lord Lawson, as Chancellor, created from a budget surplus an inflationary boom. Everyone went mad borrowing and spending money, and house prices went through the roof. Unfortunately, the inevitable reckoning coincided with a world recession, which made the bite that much more savage.

Despite what Labour Members say, the previous Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), created a virtuous circle—the economy was moving in the right direction. Growth meant more employment, which meant more Government revenue, which meant that more money could be spent on social policy, which, in turn, fed through to further growth and employment.

Mr. Sheerman

Will the hon. Gentleman give way on that point?

Mr. Page

If the hon. Gentleman can contain his enthusiasm, I will let him have his threepence worth in a few seconds.

Every single month over the past three years, unemployment has come down—until now.

Mr. Sheerman

The real critics of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), sit not on the Government but on the Opposition Benches; indeed, many of them sit on the Front Bench. The virtuous circle to which the hon. Gentleman referred was in many ways achieved.

Mr. Page

I do not join those who criticise my right hon. and learned Friend. He attracts that criticism by his enthusiasm for the euro.

I still do not know whether the Chancellor diagnosed the problem correctly. When he took over in May, with his enthusiasm for hitting the ground running—we will have more living proof of "legislate in haste and repent at leisure"—the general view was that the problem was that there was some froth in the high street that needed restraint. Inflation was occurring not in the manufacturing sector, but in the high street.

I have no objection to monetary policy being handed over to the Bank of England, but fiscal policy should not be operated completely independently and with a set of blinkers. The aeroplane analogy of the hon. Member for South Thanet (Dr. Ladyman) was interesting, but if one puts on too much flap and reduces the throttle while trying to keep the nose up, the plane will eventually fall out of the sky, and that is exactly what is happening at the moment.

Mr. Sheerman

Oh, come on.

Mr. Page

The hon. Gentleman may disagree, but I happen to know that that is exactly what happens if one does that in an aircraft. The Chancellor's reactions last year turned a small difficulty into a major problem. The so-called windfall tax was a smash-and-grab raid on the utilities. It seems to have been forgotten that the industries that the previous Government privatised cost the taxpayer £50 million a week when they were nationalised, and that an equivalent sum started coming into the Exchequer afterwards. That is one of the reasons why the Labour Government have suddenly become such converts to certain forms of privatisation.

The Government will have to face that problem with the Post Office. I cannot see the Post Office succeeding in the modern world without being set free from the shackles of Government. If we took note of other countries' practice in introducing commercial aspects to their post offices, we might reconsider our policies.

The Chancellor showed that the Government do not really care about manufacturing industry when he hit it with advance corporation tax. At the same time, interest rate rises were driving up the value of the pound and making it impossible for our manufacturers to compete abroad. The hon. Member for South Thanet made a couple of cracks about running businesses and Conservative Members' lack of experience. From my modicum of experience, I know that we can ask manufacturers to increase productivity by 4, 5 or 6 per cent. in a year—with effort, they can do that each year—but we cannot ask them to increase it by 30 per cent. in a single year. The extra blow to manufacturing this year has been the straw that broke the camel's back.

Hurting British manufacturers has made imports cheaper, which has contributed to the froth in the high street. If people spend more money on imports, the balance of payments suffers and it is that much harder to drive out inflation. The Bank of England has used its one stick—interest rates—time and time again. It has over-corrected, and should bring interest rates down faster than it put them up.

No one in the House would take any pleasure in the problematic state of the manufacturing sector of our economy. On that issue, we are all united. Nevertheless, despite Government Members' brave words, we can all see the worrying signs that manufacturing industry is facing serious difficulties. Output has fallen for the last two quarters for which figures have been published, and the survey to be published this week by the British Chambers of Commerce will show the severe impact of the strength of sterling on manufacturing exporters.

The Institute of Directors published a quarterly survey in June. It says: Our March survey showed a sharp fall in export orders, capacity utilisation and expected output growth; the June survey shows further weakening in those areas, together with a dramatic downturn in business optimism. It continues in that gloomy tone.

Manufacturers in the west midlands are feeling the effects more keenly than practically anywhere else in the United Kingdom, and proper attention should be paid by the Government and by Parliament. Manufacturers' export order books have contracted sharply, and in the north-east of England orders are at their lowest since 1990. The hundreds of job losses announced by Pringle and Barbour in the north-east in the past fortnight are, I am sorry to say, being replicated in textile firms in such places as Bradford and Scotland, and in engineering firms on the Humber.

The state of manufacturing is much better in other areas, such as the south-east, where the financial services sector is much more important, and the south-west; but even in those two regions there are recruitment bottlenecks and the first signs of a slowdown in activity. It will be surprising if Britain does not experience a prolonged period of slow economic growth and rising unemployment, whatever measures are introduced.

The consequences can easily be predicted. An unemployment rise will inevitably increase the tensions between employers, who will try to contain their costs, and employees, who will obviously want to maintain their salary levels. There will be some industrial unrest. One does not have to be Ed Balls to see that. The new culture of partnership between employer and trade union that the President of the Board of Trade commended to the House in her White Paper on fairness at work will inevitably be undermined.

I have always found it hard to understand how good industrial relations can be ensured by legislative proposals to give unions unnecessary privileges. The Government have created problems for themselves. The requirements placed on employers by their minimum wage proposals will increase wages and wage costs, if for no other reason than that people will want to maintain differentials. It will be more difficult to generate new employment opportunities.

Hon. Members on the Government Benches will have heard the general secretary of the Amalgamated Engineering and Electrical Union, Mr. Ken Jackson, call on the Bank of England to end its war of attrition against manufacturing industry, and to lower interest rates. That call has been made in the House, and it will be made many times more. The Government tell us, and will tell us again, that the economy is heading for a soft landing. I recall a former Chancellor prophesying green shoots, but they took a long time to come. It may also be some time before that soft landing occurs.

Decisions must be taken if Britain is to get back on track to sustainable long-term growth. The Chancellor of the Exchequer assured us in The Times last Friday that the right decisions had been taken. He is reverting to the type of Labour Chancellors by repeating their traditional incantation about the danger of excessive wages.

Mr. Redwood

The Government forecast a soft landing on average, which means a crash landing for manufacturing, and no landing at all for high fliers on their side.

Mr. Page

My right hon. Friend proves the point that there are lies, damned lies and statistics. Averages always mean someone is at the top, but someone else is equally far from the average at the bottom.

Incantations about the dangers of private sector wage rises unfortunately follow a rate of inflation already well above the Government's 2.5 per cent. target. Public expenditure will also increase by 2.75 per cent. on top of inflation over the next three years. and that will mean substantial growth in the burden of taxation, beyond the economy's growth rate.

The traditional features of Labour Government are high public spending that is growing faster than the economy, rising inflation, declining manufacturing and the prospect of rising unemployment. I have been through that before in the late 1970s, and I have a feeling of deja vu. I doubt that even Mr. Derek Draper—if he were ever released back on to the circuit—would be able to spin the Labour party out of that problem and the political unpopularity that will result. It would be better for the Government to admit now to the truth of my analysis, but I doubt that they will do so. I doubt, too, whether Labour Back Benchers could bring themselves to do so.

A play in the 1960s called "The Company Way" sums up the position of Labour Members, in the words: I play it the government way. Where the government puts me, there I'll stay…I have no point of view. Whatever the government thinks, I think so too.

Mrs. Dunwoody

Author?

Mr. Sheerman

Author?

Mr. Page

Not me.

Not surprisingly, that play folded after a few weeks. Unfortunately, the Government have a few years to go, and we will all suffer from what they did in their first Budget in June 1997.

The previous Government, of which I was proud to be a member, were committed to promoting competition, to improving the quality of production and to restoring our country's national pride in manufacturing. We succeeded in raising the national level of output after 1992, and in recording significant gains in productivity, especially between 1994 and 1997. Not many hon. Members seem to understand that if the number of units on a production line is reduced by 10 per cent. or 20 per cent., profit does not drop by only that amount. Standing costs remain, and the cut in production bites into the company's success. A company that cannot keep up growth goes out of business.

A small downturn has devastating effects on companies. That is why it is necessary to have stability in the economy. Manufacturers need to plan ahead for 10 or 15 years to recoup their capital costs. Companies cannot expect an 80 per cent. jump in annual turnover to save the day. They do not make that sort of money, but deal in small percentages, and that is why stability is necessary.

When we were in government, there was, for the first time, a major growth in manufacturing exports. Our industrial relations record had never been better. Sadly, the golden legacy we left for the new Government in May 1997 has been put at risk. The difficulties being faced by the economy as a whole and by manufacturing in particular cannot be solved by some Calvinistic injunction to be good when those who make that injunction are gambling with the country.

Harry Truman, the former American President, got it right when he said that it is a recession when a neighbour loses his job, but a depression when you lose your own. For too many people in manufacturing, the recession is already here. For some Ministers, the depression is only a few days away, but for the rest, it is just a matter of time.

6.15 pm

Mr. Barry Sheerman (Huddersfield)

I have been disappointed by some of what I have heard, particularly from the right hon. Member for Wokingham (Mr. Redwood). I was delighted when the Opposition chose to spend half a day on manufacturing. It seemed a wonderful opportunity for a serious debate about the fundamental problems of manufacturing. However, his speech dwelt wholly on the surface, scoring points and making political jibes. His analysis was very superficial—he is good at that. What irritated me most was that the fundamental problems of our country are worth talking about seriously.

The right hon. Gentleman sometimes chides people like me who represent industrial constituencies—Huddersfield is certainly an industrial constituency—for not speaking up for industrialists. The way to do that, however, is to examine changing patterns in the global economy and how our industrial and manufacturing sectors fit in. If we could dwell on that, the debate would be much more useful.

Mr. Redwood

I hope that the hon. Gentleman will recollect that I set out a six-point programme to improve matters for manufacturers. Does he agree that, unless something is done pretty soon about interest rates and exchange rates, a lot more manufacturing will close?

Mr. Sheerman

The right hon. Gentleman knows that we must deal with global economic problems. Unprecedented change has occurred in the world economy over the past five years. Sometimes, I hear Alistair Cooke, now in his 80s, on my radio on a Sunday morning giving his in-depth analysis of the global economy and its effects on the United States and Europe. He is a man of great experience who is capable of squeezing into eight minutes—the BBC, yet again, has cut him back—the core of a matter. In a recent programme, he spoke about the fact that the global economy has become a reality in his lifetime. People used to talk about it; now it is here.

The crisis in south-east Asia is wide-ranging. We can wish it away, or pretend it does not exist. We can pretend to carry on as if it were of little significance, but it is a large change in the global economy. We are still facing up to it, and there will be worse to come. The United Kingdom must be seen in that light, and in relation to other instabilities. I am pro-European and, given the right measures and proper caution, I am in principle in favour of joining the European single currency, but there is some instability in the European Union.

We face a flight from the deutschmark to the pound and the dollar. One ray of sunshine is the American economy, whose tenacity and vibrancy is coupled with the ability to reinvent itself. We must learn some lessons from the American example and consider our economy in the context of real changes throughout the world.

I am something of an historian, so I must return to what I regard as a seminal work in terms of how we view British manufacturing and industry. In 1993, the London business school and IBM produced a consultancy report entitled "The True State of British Industry". That report changed everyone's mind about the state of British business. Until then, many people had thought that British business was pretty damn good and that we should continue to do what we had always done. Bad times were blamed on inflation, the exchange rate and many other factors, and the consensus was that there was nothing really wrong with British business and management.

Using a set of criteria, "The True State of British Industry" presented the facts. It revealed that between 1 per cent. and 1.5 per cent. of British companies were world class and that, if superhuman efforts were expended, 38 per cent. of British companies could become world class. That meant a hell of a lot of changes. According to the report, 60 per cent. of British industry was hardly saveable. It predicted that most companies would disappear and no longer be real players in the British economy.

That seminal work changed hearts and minds in the Conservative party, in the Labour party and in British business. As President of the Board of Trade, the former Deputy Prime Minister, the right hon. Member for Henley (Mr. Heseltine), produced competitiveness White Papers that attempted to address those problems. The way in which the Labour party regarded business and the problems facing it changed totally. The report probably changed the Liberal Democrats also—although I know less about their thinking. It changed us all, and so it should.

At the same time, there were other changes in management. The Royal Society for the Encouragement of Arts, Manufactures and Commerce, of which many of us are fellows, took up the challenge. Some 25 chief executives and chairmen of blue-chip companies spent two and a half years analysing what constituted a "tomorrow's company": a company that would survive into the next century and beyond while remaining a vigorous player. Many of the great companies that were listed in "Fortune" 500 a year ago, are no longer there. They have not survived: they have been taken over or gone out of business. The "tomorrow's company" philosophy and tool kit was extremely valuable because it represented an attempt to learn lessons from world-class companies so that the nation could start addressing the problems.

Five years later, the British manufacturing economy has not come to terms with that challenge. There have been some improvements, but not enough. I was slightly amused by the comments by my old friend the hon. Member for South-West Hertfordshire (Mr. Page)—we have been on opposing sides for so long that I think of him as a friend; although not an hon. Friend—who said that the previous Government increased exports. If someone devalues the currency by 30 per cent. and does not improve manufacturing export performance, God help us. Yet that is what occurred.

Manufacturing benefited from coming out of the exchange rate mechanism and from a massive devaluation. British business had a very cosy time—in fact, it was a bit too cosy. British companies did not have the urge to change into more efficient and productive industries. When the German economy was faced with a highly valued deutschmark, business used the time to retain and expand its market share by examining the quality of management and over-all manufacturing capacity. German manufacturing increased productivity in circumstances similar to those we face at present, and improved its market share.

Mr. Page

I agree with much of what the hon. Gentleman has said. However, does he accept that, the last time there was a devaluation, we started to fight our way back in volumes of sales and in growth of manufacturing exports and productivity? We did not look to devalue our way out of the crisis, as we had done time after time. Last time, it was different: we cracked the failings of the past and embarked upon a virtuous cycle. A Government reshuffle is imminent, and I hope that the hon. Gentleman's manufacturing expertise is recognised with a place on the Front Bench.

Mr. Sheerman

I shall respond not to the second but to the first point. The hon. Gentleman raises some interesting issues. I thought that he was arguing against an independent central bank. The fact of the matter is—let us not be party political about this—that Britain's record, under all parties, in handling its currency has been a disgrace. We got into trouble with high long-term interest rates because we did not have a bank and a currency that we could trust. Rather than take tough decisions on the economy, every Government devalued the currency. That was true of both major parties in government.

In the first few days of this Administration, the Chancellor took the bold and imaginative step of ending all that. He sought to ensure that we have a currency that people can trust. I remember visiting the Bank of England three or four years ago and I was amazed when the Governor, Eddie George, said, "Until we came out of the ERM, the Bank of England didn't have a vision statement; we just did what we did. Afterwards, we produced a vision statement that said that we should have a sound currency, low inflation and a climate in which business can thrive." I assume that the Bank of England has retained that vision statement.

Mr. Redwood

Does the hon. Gentleman agree that the technicians have won and the Bank has had its way on two occasions in the 20th century: first, in relation to the gold standard; and, secondly, in relation to ERM? Those moves ended in massive job losses and manufacturing haemorrhage. Is the hon. Gentleman at all concerned that the current experiment might end the same way?

Mr. Sheerman

When I hear the right hon. Gentleman speak, I am often reminded of my right hon. Friend the Member for Chesterfield (Mr. Benn), who is an expert at plucking two dates from history and making an historical case. That is the worst sort of historical analysis. The right hon. Gentleman is just like my right hon. Friend, although he does not write or speak so much about historical subjects. One cannot conduct an analysis in that way. We must analyse what has happened to our currency, and trust in that currency over a long period.

I have recently been described in several columns as a "parliamentary poodle"—I have never viewed myself in that way—but that is one decision that I believe is good for the economy. The vision statement of the Bank of England must be correct: businesses seek security. They want to know that they are operating in a stable environment. We have not had that in this country for a long time. Stability counts; it is crucial.

Sir David Madel

I have listened carefully to the hon. Gentleman's comments. There is no stability for industry if interest rates continue to rise when they should not. That does not do anything for industry.

Mr. Sheerman

I am not going to speak much longer, but I intervened on the right hon. Member for Wokingham on interest rates, for which I have figures back to 1950. We are still in a very low interest economy compared with most of the time under the Administrations of which he was part, when they reached 11, 13 and 14 per cent. The only time that interest rates have neared present levels was in the almighty recession of the early 1990s. The tragedy is that we have been a high-interest economy. That has been a tax all the time on my industrialists in Huddersfield and on our manufacturing sector.

We must achieve long-term low inflation and low interest. That is the secret. That is what Germany and the United States are better at. Looking at our motion, that is exactly what is crucial. It is sometimes tough and I feel terribly sorry about that. This morning, I was at John Brierley, a 100-year-old cotton spinning company in my constituency. It is finding it tough and I have every sympathy, but our motion is about securing our economy for the long term. Too many politicians in this country have been obsessed with the short term. The Tories do not like it because we have gone for the long term. Sometimes it hurts in the short term to get it right in the long term. That is why I shall support the Government in the Lobby and why I think overall that the pattern set now is right for British industry and manufacturing.

6.30 pm

Mr. Tim Boswell (Daventry)

This is a serious issue which Members of Parliament do not treat at one remove. Many of us have personally experienced the consequences of six hikes in interest rates and the inconvenience of getting to work through tube strikes. Those of us who remember the winter of discontent—I often remind myself that not all of us now remember it, even in this place—look out on this rather drenched summer, for which I do not blame the Government, and see the signs of a strong and growing industrial El Niño effect, for which I do blame them. The debate has been eloquent in showing the widespread concern about manufacturing industry. That says a lot, even if our prescriptions differ on how to deal with it.

I and many other Conservative Members have a strong commitment to raising our competitiveness through better education and training, to the practice of good industrial relations and to the success of manufacturing industry. My right hon. Friend the Member for Wokingham (Mr. Redwood) and others deployed powerful arguments. Several of my right hon. and hon. Friends have distinguished records on the subject.

It is interesting that new Labour has been rather absent from the debate and unable to say how well things were going. [Interruption.] It appears to be getting its messages now. Whereas until recently new Labour has been in denial, the argument that it is all the fault of the last 18 years of Conservative government is rapidly running out of road. The time is coming when the Labour Government will have to stand up and be counted and be accountable for their actions in respect of manufacturing.

Mr. MacShane

Does the hon. Gentleman recall an Opposition day debate this Parliament that was so poorly attended by Conservative Back Benchers?

Mr. Boswell

I recall that many of my hon. Friends were here for the introduction of my right hon. Friend the Member for Wokingham. I have the impression that many others—not, of course, because of my contribution—are hurrying to the Chamber even now.

I want to talk not so much about manufacturing industry as about industrial relations. My right hon. Friend the Member for Wokingham made some telling points about the problems. The hon. Member for Eastleigh (Mr. Chidgey) referred extensively in his interesting speech to the problems of the engineering industry. He took the words out of my mouth on that, so I confine myself to noting that hon. Member for Rugby and Kenilworth (Mr. King) and I met the Minister for Science, Energy and Industry to discuss problems in the large power generation plant industry that affect employment in my constituency. Those are not the only problems.

In a letter to me enclosing its business survey, the Institute of Directors refers to a dramatic collapse in business optimism", with an especially abrupt fall in the manufacturing industry. The 3Is barometer survey of business confidence is at its lowest level since 1992. "Office World" is often quoted by DTI Ministers. Its quarterly small business survey announces: Warning signs from small businesses—Government's honeymoon over". Professor Robert Blackburn heads the small business research centre at Kingston university. He concludes: "The signs are ominous."

The question before the House is what is the sensible action for a responsible Government at such a time. We understand that macro-economic management is difficult—as many hon. Members have conceded, it has been difficult for Governments of all colours—but what do we do about it, given that it is difficult? There are undoubted problems. Should not we be doing everything possible to avoid heaping greater burdens on industry? Such burdens might arise through taxation, additional regulation or industrial action frustrating management. The three together are increasingly adding up to a noxious brew.

The Chancellor of the Exchequer warns companies about their earnings record while imposing a cool £25 billion of extra taxation over the Parliament on business alone. The Monetary Policy Committee is in agonies trying to balance its inflation targets with the consequences for manufacturing industry in particular. Businesses and trade unions, well aware of the likely score, are trying to get their retaliation in first. That is well exemplified by the industrial strain in London Transport today.

On industrial strain, we had some revealing figures in the exchanges with the President of the Board of Trade. She is not here to answer the point, but she sought, somewhat disingenuously, to compare a series of figures about our record in the 1980s with figures that I gave on the Labour record in the 1970s. What is incontestable is that industrial relations are very much better than they were when the last Labour Government left office. That is well shown by the fact that, in 1979, 29 million days were lost; by 1994—the figures are little worse now—only 1 per cent. of that number were lost. I am delighted that we are on the verge of solving the industrial relations problem. The question is whether the Government's proposals help or hinder the process. In almost every respect, they are likely to make matters considerably worse.

Let us kick off with the minimum wage, which, as the Minister knows, has been extensively debated. At least we now have the report of the Low Pay Commission. There is the interesting question of the impact of the minimum wage on business costs. The commission estimates the direct impact at 0.6 per cent. To that must be added the entirely unquantified impact on differentials, which may not be too great because of the figure chosen, which has been further doctored down by the Chancellor because of the concern that he raised in his arguments with the DTI.

Be that as it may, the minimum wage is not the only leg of the stool, because we go on to "Fairness at Work", which the Minister, in fairness, sees as a major part of his proposals. We have had the recognition debate, and we found that the Confederation of British Industry had got its way on the 40 per cent. hurdle, but there had to be many concessions, and, even at 40 per cent., there is still plenty of leverage for those who want to make disputes to ensure that they happen.

Perhaps more serious than the recognition figure is the impact of the unfair dismissal proposals. In particular, I draw the House's attention to the fact that it is likely to poke up the route of recourse through employment tribunal on grounds of unfair dismissal with no limit on damages, in comparison with a more legally based claim of wrongful dismissal, which is confined to the contract term.

Finally, there are several interesting and important issues relating to representation that the Government have not properly addressed. For example, it is even possible to allow for a disaffected employee to drag in the representative of one trade union when another trade union is recognised. That will increase the possibility of inter-union disputes like those of the 1970s, which we had thought we could now forget.

My first criticism of the change that is taking place is that it is all about litigation and using litigation for recourse, rather than being in line with the spirit of the all-party approved private Member's legislation to resolve disputes, wherever possible, by consensus, arbitration or agreement.

Secondly—as I warned the Minister of State—I was staggered when I engaged in correspondence with him and asked, innocently enough, what the compliance costs were of his proposals on "Fairness at Work", but, so far, answer have I none at all. We shall have to continue asking.

As if the minimum wage and "Fairness at Work" were not enough, there are several other measures in the pipeline. There is the implementation of the working time directive, which is supposed to be introduced on 1 October. There is a slight problem, in that the regulations have not been published. How can firms be expected to comply with, to implement or to prepare to implement regulations that are not yet in existence if they do not know what they are to contain?

Above and beyond that, there is the implementation of an avalanche of European directives, some arising out of the social chapter, including those relating to works councils, parental leave, and part-time working, and the revision of the assured rights directive. Together, those all lead in one direction: they offer rights without further responsibilities, impose further costs on business and, therefore, concomitantly reduce employment opportunities. Taken together, they are bad news for business.

Yesterday, I visited an important showcase for British industry, the Silverstone grand prix circuit, which is shared between my constituency and that of my hon. Friend the Member for Buckingham (Mr. Bercow), although mine contains the grandstand, the start, the finish and the pits. I mention it not only because it is a remarkable example of what this country can achieve through its inventiveness, but because it is an analogy for competition. There is a range of grand prix cars which, to my untutored eye, all look the same; they may be painted rather differently, but they all have multiple and complex names and they all go extremely fast—far faster than I would choose to go. The actual difference between them in terms of performance is only 1 or 2 per cent., but that is everything; that is what the whole industry is based on. If we want to be competitive, it is no good saying, "We can take a little rubbish from 'Fairness at Work' and a few extra costs in taxation," because those small things can silt up the whole process and choke it.

The President of the Board of Trade, who has now rejoined us, is deemed to be irrelevant by some of her colleagues, so we can leave her out of the analogy. However, when I consider the position of the Prime Minister and the Chancellor of the Exchequer and which analogy I should apply to their attitude to British industry, I am drawn irresistibly to that of the oysters in "The Walrus and the Carpenter", or, to bring it up to date in new Labour speak, the plumber and the leaker, whichever is which. The House will recall that the Walrus said: 'I deeply sympathise.'… But answer came there none"; as the House will remember, the reason was, They'd eaten every one We do not believe that the situation of British industry and manufacturing industry is irredeemable. Tonight, we are trying to save the Government from the follies of their own policies. In an effort to do so, we have tabled our motion and we shall press it to a Division.

6.44 pm

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney)

First, I thank my hon. Friends the Members for Rotherham (Mr. MacShane), for South Thanet (Dr. Ladyman) and for Huddersfield (Mr. Sheerman) for both the content of their speeches and the enthusiasm for Government policy that they expressed.

I understand that, on the right occasion, the right hon. Member for Wokingham (Mr. Redwood) enjoys a Big Mac. Let me tell him that I am one Big Mac that he will not be devouring tonight. His speech evoked a sense of deja vu; one would have thought that the Conservative crew had never been in government, or left an inheritance for Labour to clear up.

Under the Conservatives' tutelage and during their period of responsibility, 2.5 million manufacturing jobs were lost. They discouraged investment in manufacturing, to the extent that investment grew by only 0.5 per cent. per annum. The value of manufacturing imports exceeded that of exports by more than £100 billion. Among manufacturing companies, insolvencies quadrupled under the previous Government. Like the electorate, industry wants an end to those disastrous policies. It wants an end to instability, which our policies are designed to achieve.

Today, Dun and Bradstreet reported that manufacturers now expect a growth in sales, orders, profits and employment; that is a radically different view from that expressed by Conservative Members. The Institute of Directors reports three quarters of manufacturers performing well or very well. More than twice as many manufacturers expect to increase investment as expect to cut it. That is not a sign of a Government's policies in crisis. Many other independent forecasters, including the Confederation of British Industry, expect manufacturing output to grow both this year and next.

The Opposition have tabled a spurious motion on recession and a crisis in employment relations. The right hon. Member for Wokingham has been unable to give a single, sustainable, fact-based argument that the problems that the Labour Government are now tackling are not the legacy left by him and his right hon. Friends.

The right hon. Gentleman has a bit of a reputation for economic forecasting. In 1989, he said: all about us there is manifold evidence of growth in prosperity, capital investment, and the like."—[Official Report, 12 January 1989; Vol. 144, c. 1072.] Within in a year, we had embarked on the longest recession for 50 years. Two days earlier, in a similar debate, he had gone one better by saying: About one third of the unemployed in Britain are in London, the south-east and East Anglia, and in all those parts of the country it is possible to find a job. One has only to walk down the high street to see the jobs on offer. They almost fall out of the shops."—[Official Report, 10 January 1989; Vol. 144, c. 748.] Within four years of that remark, unemployment had risen from 1.8 million to 3 million. Economic forecasting is not one of the right hon. Gentleman's strongest skills. He apologised for the 1990s, but, like some Rip van Winkle, he appears to have forgotten that the Conservative Government were in control of the economy during the 1980s as well. I hope that he does not mind my saying that he debates economic issues as effectively as he sings the Welsh national anthem.

Mr. Redwood

To say that there are many jobs available at a particular time is not to make a forecast for four years hence. What has the Minister to say about the headline of the "Business Day" section in the Evening Standard tonight, which says: Rid us of Beckett and restore morale at the DTI"? The article contains a long catalogue of complaints about ineptitude, inadequacy and failure to make decisions that business needs. Will the Minister get in touch with business and understand that there is a serious crisis?

Mr. McCartney

The right hon. Gentleman should stop overdosing on Viagra. He is over-excited. One point is absolutely certain—my right hon. Friend the President of the Board of Trade and other Ministers in the Department have proved since the first day of this Government that we are effective not only individually but collectively. We are one of the best Departments in the Government. Under the previous Government, job insecurity was rife, but I can assure the right hon. Gentleman that my right hon. Friend and I do not suffer from it.

The right hon. Gentleman alleged that we had made a £25 billion tax raid on companies. The Government will cut corporate tax bills by £4.5 billion, and we have cut corporation tax by a full 3 per cent. That is the lowest ever rate in the UK and the lowest of any major industrialised country. We have cut corporation tax twice and increased capital allowances for small firms; we have cut capital gains tax on long-term investment; we have cut taxes for working families on low incomes; we have cut national insurance contributions on employment; we have cut VAT on fuel from 8 per cent. to 5 per cent.

The election of a Labour Government has prevented further Tory tax increases such as VAT on food, children's clothes, books, newspapers and fares.

Mr. Redwood

Will the Minister give way?

Mr. McCartney

The right hon. Gentleman should quit while he is ahead, but I shall give way.

Mr. Redwood

If the Government have made all those cuts in business taxes, why does the Chancellor's Red Book show a £25,000 million increase in the business tax burden?

Mr. McCartney

That is related to growth in the economy. The Government are directly reducing taxes for business.

I shall concede one point to the right hon. Gentleman: the Government have introduced one tax—the windfall tax—and I am proud of that. The previous Government allowed privatised utilities to make bumper profits while unemployment among young people and older workers increased to the point at which there was mass unemployment everywhere in Britain. We introduced a windfall tax to fund the new deal. I am proud of that, and the public are proud of it. The new deal is seen as one of the most successful programmes for introducing, at last, training and work opportunities for young people and older workers. The previous Government abandoned them year after year.

The hon. Member for Daventry (Mr. Boswell) spoke about employment relations. Looking back at the inheritance that we received when we came into office, we can see that, shamefully, under the previous Government, the International Labour Organisation listed the UK, along with Burma, as a country that was imposing limitations on workers' rights to the extent that we were not complying with our international obligations—Burma, I ask you. That is a regime known for its cruelty to all its citizens. We were bracketed with that country for our lack of compliance with ILO conventions.

The previous Government abolished wages councils, denying more than 2 million workers protection against poverty pay. They burdened the tribunal system with huge delays because of the increasing number of people who felt that they had been unfairly treated in the workplace. They systematically failed to work with trade unions and listen to their views.

The previous Government were even taken to the European Court. The former Home Secretary, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), had a record as long as his arm of losing cases in the European Court for denying British people their rights. The man was a scandal and, if it had not been for the election, he would probably have been locked up because of his long record of failure to comply with the law.

Believe it or not, the previous Government went to court and lost because they did not want the lowest-paid workers in Britain to have three weeks' paid holiday—four weeks by the turn of the century. That is the previous Government's record, which we had to follow.

The hon. Member for Daventry raised the issue of today's rail strikes. The previous Government lost almost 900,000 working days in transport and communications in their last year of office. None of us wants strikes. The whole purpose of partnership is to reduce conflict in the workplace. The previous Government had a clear record of policies that led to substantial numbers of days being lost through industrial action in the rail industry.

Mr. Boswell

Will the Minister tell the House whether the rail union is today striking against the policies of the previous Conservative Government or those of the present Labour Government?

Mr. McCartney

The position is clear—the hon. Gentleman left us a legacy of under-investment, poor industrial relations and a demoralised work force. It has been left to this Government to start investing to clear up the results of their policies.

Opposition Members do not believe in partnership, but they are very isolated. Even Sir Stanley Kalms, the Tory party's biggest fund raiser, announced last week a recognition arrangement between his company and the Amalgamated Engineering and Electrical Union. Levi Strauss, United Distillers, PowerGen, Tesco and Lucas are all making similar moves. Across Britain, employers are moving towards partnership and fairness in the workplace. Only the Conservatives, wedded to the past of undercutting and under-resourcing people in the workplace, do not believe in partnership and a joint approach to solving employment problems. They do not believe in trade unions having the right to exist in the workplace. They do not believe that unions are good for partnership.

Our White Paper has pledged funds to contribute to the training of managers and employee representatives to assist and develop partnerships at work. My right hon. Friend the Secretary of State for Education and Employment announced a £2 million fund for union learning to support innovation in promoting learning and skills at work and to stimulate new partnerships. Would the Conservative party reverse that policy? Would it repeal the "Fairness at Work" White Paper proposals for funds to improve training and education in partnership for managers and employees? Would the right hon. Member for Wokingham withdraw funding for better relationships in the workplace? Would he repeal the proposals to give people the right to paid holidays? If he opposes those proposals, will he state whether the Conservatives, if they ever won an election, would repeal those new rights?

People are sick and tired of the Tories' old agenda. They want to move towards partnership in the workplace. That is why "Fairness at Work" has been overwhelmingly accepted. The right hon. Member for Wokingham has been waxing lyrical about why, even now, he opposes a minimum wage of £3.60, but he had to admit, under pressure, that he has a part-time job paying £12,000. Will he confirm that he has also been given 100,000 share options for a part-time job? He opposes a national minimum wage of just over £7,000 for someone who is working full time. He is guilty of double standards and hypocrisy.

We need no lessons from the right hon. Gentleman about the importance of establishing a minimum wage. Will he fight the next election on wage cuts by pledging to remove the right to a national minimum wage? I am giving the right hon. Gentleman the opportunity to answer. Will he oppose the continuation of the national minimum wage at the next election, possibly forcing wage cuts on many low-paid workers?

Mr. Redwood

The Minister has often asked that, and I have always given him a clear answer. We shall review all Labour's measures just before the next election and decide what is right for this country in the interests of more people having opportunities and jobs. We are not against decent wages; we are against people losing their jobs through ill-thought-out legislation.

Mr. McCartney

The right hon. Gentleman's reply is very interesting. All women workers in Britain now understand that the Conservative party will review their new rights as part-time workers, their rights to parental leave and their improved maternity rights. The right hon. Gentleman's statement shows that, by the next election, the Conservatives will have learnt nothing from the previous election, and that they are prepared to undermine people's entitlements in the workplace. Every worker in Britain—all 25 million of them—should realise that, at the next election, the Conservatives' policy will be to remove the entitlements and rights that were given by this Government. That is a disgraceful position for the Conservatives to place themselves in.

We have said in our White Paper that we shall reduce from two years to one year the qualifying time for protection against unfair dismissal. Will the right hon. Gentleman say whether he intends to remove that right and return the qualifying time to two years? Does he accept that, under the previous Government's proposals, many workers were undermined by their employers and could not gain access to arrangements to prevent them from being treated unfairly in the workplace? Does he intend to reverse our decision, which has been accepted by the overwhelming majority of British industry? Will he be isolated again and fight the election on the basis that workers will be able to be undermined by unfair practice in the workplace?

In The House magazine of 19 December, the right hon. Gentleman said: I knew that in the end I wanted to be able to make my own statements and live and die by my own remarks. By his own remarks today, he has died a thousand deaths. Let us make sure that we give him a decent burial in the Lobby and reject the motion.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 134, Noes 313.

Division No. 333]	[7 PM
AYES
Ainsworth, Peter (E Surrey)	Davis, Rt Hon David (Haltemprice)
Amess, David	Day, Stephen
Ancram, Rt Hon Michael	Duncan, Alan
Arbuthnot, James	Duncan Smith, Iain
Atkinson, Peter (Hexham)	Emery, Rt Hon Sir Peter
Baldry, Tony	Faber, David
Bercow, John	Fabricant, Michael
Beresford, Sir Paul	Fallon, Michael
Blunt, Crispin	Flight, Howard
Boswell, Tim	Forth, Rt Hon Eric
Bottomley, Peter (Worthing W)	Fowler, Rt Hon Sir Norman
Bottomley, Rt Hon Mrs Virginia	Fox, Dr Liam
Brady, Graham	Gale, Roger
Brazier, Julian	Garnier, Edward
Brooke, Rt Hon Peter	Gibb, Nick
Browning, Mrs Angela	Gill, Christopher
Bruce, Ian (S Dorset)	Gillan, Mrs Cheryl
Butterfill, John	Goodlad, Rt Hon Sir Alastair
Chapman, Sir Sydney (Chipping Barnet)	Gray, James
	Green, Damian
Chope, Christopher	Greenway, John
Clark, Rt Hon Alan (Kensington)	Grieve, Dominic
Clarke, Rt Hon Kenneth (Rushcliffe)	Gummer, Rt Hon John
	Hague, Rt Hon William
Clifton-Brown, Geoffrey	Hamilton, Rt Hon Sir Archie
Colvin, Michael	Hammond, Philip
Cormack, Sir Patrick	Hawkins, Nick
Cran, James	Hayes, John
Curry, Rt Hon David	Heald, Oliver
Davies, Quentin (Grantham)	Heathcoat-Amory, Rt Hon David

Hogg, Rt Hon Douglas	Prior, David
Horam, John	Randall, John
Howard, Rt Hon Michael	Redwood, Rt Hon John
Hunter, Andrew	Robathan, Andrew
Jack, Rt Hon Michael	Roe, Mrs Marion (Broxbourne)
Jackson, Robert (Wantage)	Rowe, Andrew (Faversham)
Jenkin, Bernard	Ruffley, David
Johnson Smith, Rt Hon Sir Geoffrey	St Aubyn, Nick
	Sayeed, Jonathan
Key, Robert	Shephard, Rt Hon Mrs Gillian
King, Rt Hon Tom (Bridgwater)	Simpson, Keith (Mid-Norfolk)
Kirkbride, Miss Julie	Soames, Nicholas
Laing, Mrs Eleanor	Spelman, Mrs Caroline
Lait, Mrs Jacqui	Spicer, Sir Michael
Leigh, Edward	Stanley, Rt Hon Sir John
Letwin, Oliver	Steen, Anthony
Lewis, Dr Julian (New Forest E)	Streeter, Gary
Lidington, David	Syms, Robert
Lloyd, Rt Hon Sir Peter (Fareham)	Tapsell, Sir Peter
Loughton, Tim	Taylor, Rt Hon John D (Strangford)
Luff, Peter	Townend, John
Lyell, Rt Hon Sir Nicholas	Tredinnick, David
MacGregor, Rt Hon John	Trend, Michael
McIntosh, Miss Anne	Tyrie, Andrew
MacKay, Andrew	Walter, Robert
Maclean, Rt Hon David	Wardle, Charles
McLoughlin, Patrick	Waterson, Nigel
Madel, Sir David	Wells, Bowen
Malins, Humfrey	Whitney, Sir Raymond
Maples, John	Whittingdale, John
Mates, Michael	Wilkinson, John
Maude, Rt Hon Francis	Willetts, David
Mawhinney, Rt Hon Sir Brian	Wilshire, David
May, Mrs Theresa	Winterton, Mrs Ann (Congleton)
Moss, Malcolm	Winterton, Nicholas (Macclesfield)
	Woodward, Shaun
Nicholls, Patrick	Young, Rt Hon Sir George
Ottaway, Richard
Page, Richard	Tellers for the Ayes:
Paice, James	Mr. John M. Taylor and
Pickles, Eric	Mr. Tim Collins.
NOES
Adams, Mrs Irene (Paisley N)	Brinton, Mrs Helen
Ainsworth, Robert (Cov'try NE)	Brown, Rt Hon Nick (Newcastle E)
Alexander, Douglas	Brown, Russell (Dumfries)
Allen, Graham	Browne, Desmond
Anderson, Donald (Swansea E)	Bruce, Malcolm (Gordon)
Anderson, Janet (Rossendale)	Burden, Richard
Armstrong, Ms Hilary	Burstow, Paul
Ashdown, Rt Hon Paddy	Byers, Stephen
Ashton, Joe	Cable, Dr Vincent
Atkins, Charlotte	Campbell, Alan (Tynemouth)
Ballard, Jackie	Campbell, Menzies (NE Fife)
Banks, Tony	Campbell, Ronnie (Blyth V)
Barron, Kevin	Campbell-Savours, Dale
Battle, John	Canavan, Dennis
Bayley, Hugh	Cann, Jamie
Beard, Nigel	Caplin, Ivor
Beckett, Rt Hon Mrs Margaret	Casale, Roger
Beith, Rt Hon A J	Caton, Martin
Bell, Martin (Tatton)	Cawsey, Ian
Benn, Rt Hon Tony	Chapman, Ben (Wirral S)
Bennett, Andrew F	Chaytor, David
Benton, Joe	Chidgey, David
Bermingham, Gerald	Chisholm, Malcolm
Best, Harold	Clapham, Michael
Betts, Clive	Clark, Rt Hon Dr David (S Shields)
Blair, Rt Hon Tony	Clarke, Charles (Norwich S)
Blears, Ms Hazel	Clarke, Rt Hon Tom (Coatbridge)
Blunkett, Rt Hon David	Clelland, David
Borrow, David	Clwyd, Ann
Bradley, Keith (Withington)	Coaker, Vernon
Bradley, Peter (The Wrekin)	Coffey, Ms Ann
Bradshaw, Ben	Cohen, Harry
Brake, Tom	Coleman, Iain

Colman, Tony	Hoon, Geoffrey
Connarty, Michael	Hope, Phil
Cook, Frank (Stockton N)	Hopkins, Kelvin
Cooper, Yvette	Howarth, Alan (Newport E)
Corbett, Robin	Howarth, George (Knowsley N)
Corbyn, Jeremy	Hoyle, Lindsay
Cotter, Brian	Hughes, Kevin (Doncaster N)
Cousins, Jim	Humble, Mrs Joan
Cox, Tom	Hurst, Alan
Cranston, Ross	Hutton, John
Crausby, David	Iddon, Dr Brian
Cryer, Mrs Ann (Keighley)	Illsley, Eric
Cryer, John (Hornchurch)	Jackson, Helen (Hillsborough)
Cummings, John	Jamieson, David
Dalyell, Tam	Johnson, Alan (Hull W & Hessle)
Darling, Rt Hon Alistair	Johnson, Miss Melanie (Welwyn Hatfield)
Darvill, Keith
Davey, Edward (Kingston)	Jones, Mrs Fiona (Newark)
Davey, Valerie (Bristol W)	Jones, Helen (Warrington N)
Davidson, Ian	Jones, Ms Jenny (Wolverh'ton SW)
Davies, Rt Hon Denzil (Llanelli)
Davies, Geraint (Croydon C)	Jowell, Ms Tessa
Dean, Mrs Janet	Keen, Alan (Feltham & Heston)
Denham, John	Keen, Ann (Brentford & Isleworth)
Dismore, Andrew	Keetch, Paul
Dobbin, Jim	Kemp, Fraser
Dobson, Rt Hon Frank	Kennedy, Jane (Wavertree)
Donohoe, Brian H	Khabra, Piara S
Doran, Frank	Kilfoyle, Peter
Drew, David	King, Andy (Rugby & Kenilworth)
Dunwoody, Mrs Gwyneth	Kingham, Ms Tess
Efford, Clive	Kirkwood, Archy
Ellman, Mrs Louise	Ladyman, Dr Stephen
Ennis, Jeff	Laxton, Bob
Etherington, Bill	Leslie, Christopher
Fearn, Ronnie	Levitt, Tom
Field, Rt Hon Frank	Liddell, Mrs Helen
Fitzpatrick, Jim	Livingstone, Ken
Follett, Barbara	Lloyd, Tony (Manchester C)
Foster, Rt Hon Derek	Lock, David
Foster, Don (Bath)	Love, Andrew
Foster, Michael Jabez (Hastings)	McAllion, John
Foster, Michael J (Worcester)	McAvoy, Thomas
Foulkes, George	McCabe, Steve
Fyfe, Maria	McCartney, Ian (Makerfield)
Galbraith, Sam	Macdonald, Calum
Gardiner, Barry	McDonnell, John
George, Bruce (Walsall S)	McFall, John
Gerrard, Neil	McIsaac, Shona
Godman, Dr Norman A	Mackinlay, Andrew
Godsiff, Roger	McLeish, Henry
Goggins, Paul	McNulty, Tony
Golding, Mrs Llin	MacShane, Denis
Gordon, Mrs Eileen	Mactaggart, Fiona
Gorrie, Donald	McWilliam, John
Grant, Bernie	Mahon, Mrs Alice
Griffiths, Jane (Reading E)	Mallaber, Judy
Griffiths, Nigel (Edinburgh S)	Mandelson, Peter
Grocott, Bruce	Marsden, Gordon (Blackpool S)
Grogan, John	Marsden, Paul (Shrewsbury)
Gunnell, John	Marshall, David (Shettleston)
Hall, Mike (Weaver Vale)	Marshall-Andrews, Robert
Hancock, Mike	Martlew, Eric
Hanson, David	Michael, Alun
Harman, Rt Hon Ms Harriet	Michie, Bill (Shef'ld Heeley)
Harvey, Nick	Michie, Mrs Ray (Argyll & Bute)
Heal, Mrs Sylvia	Milburn, Alan
Heath, David (Somerton & Frome)	Moffatt, Laura
Henderson, Ivan (Harwich)	Moonie, Dr Lewis
Heppell, John	Moore, Michael
Hesford, Stephen	Morley, Elliot
Hewitt, Ms Patricia	Morris, Ms Estelle (B'ham Yardley)
Hill, Keith	Mudie, George
Hodge, Ms Margaret	Mullin, Chris
Home Robertson, John	Murphy, Denis (Wansbeck)
Hood, Jimmy	Murphy, Paul (Torfaen)

Naysmith, Dr Doug	Smith, Llew (Blaenau Gwent)
Oaten, Mark	Smith, Sir Robert (W Ab'd'ns)
O'Brien, Bill (Normanton)	Snape, Peter
O'Brien, Mike (N Warks)	Soley, Clive
O'Hara, Eddie	Spellar, John
Olner, Bill	Squire, Ms Rachel
O'Neill, Martin	Starkey, Dr Phyllis
Öpik, Lembit	Steinberg, Gerry
Organ, Mrs Diana	Stewart, David (Inverness E)
Osborne, Ms Sandra	Stewart, Ian (Eccles)
Pearson, Ian	Stinchcombe, Paul
Pendry, Tom	Stoate, Dr Howard
Pickthall, Colin	Stott, Roger
Pike, Peter L	Strang, Rt Hon Dr Gavin
Pollard, Kerry	Straw, Rt Hon Jack
Pope, Greg	Stringer, Graham
Pound, Stephen	Stunell, Andrew
Powell, Sir Raymond	Sutcliffe, Gerry
Prentice, Gordon (Pendle)	Taylor, Rt Hon Mrs Ann (Dewsbury)
Purchase, Ken
Quinn, Lawrie	Taylor, David (NW Leics)
Radice, Giles	Temple-Morris, Peter
Rammell, Bill	Tipping, Paddy
Rapson, Syd	Touhig, Don
Raynsford, Nick	Truswell, Paul
Reed, Andrew (Loughborough)	Turner, Dennis (Wolverh'ton SE)
Reid, Dr John (Hamilton N)	Turner, Dr Desmond (Kemptown)
Rendel, David	Twigg, Derek (Halton)
Robertson, Rt Hon George (Hamilton S)	Twigg, Stephen (Enfield)
	Tyler, Paul
Robinson, Geoffrey (Cov'try NW)	Walley, Ms Joan
Roche, Mrs Barbara	Ward, Ms Claire
Rogers, Allan	Wareing, Robert N
Rooker, Jeff	Watts, David
Rooney, Terry	Webb, Steve
Ross, Ernie (Dundee W)	White, Brian
Ruddock, Ms Joan	Whitehead, Dr Alan
Russell, Bob (Colchester)	Wicks, Malcolm
Russell, Ms Christine (Chester)	Williams, Rt Hon Alan (Swansea W)
Salter, Martin
Sanders, Adrian	Williams, Alan W (E Carmarthen)
Sarwar, Mohammad	Wilson, Brian
Savidge, Malcolm	Winnick, David
Sawford, Phil	Wise, Audrey
Sedgemore, Brian	Worthington, Tony
Sheerman, Barry	Wray, James
Sheldon, Rt Hon Robert	Wright, Anthony D (Gt Yarmouth)
Skinner, Dennis	Wyatt, Derek
Smith, Rt Hon Andrew (Oxford E)
Smith, Angela (Basildon)	Tellers for the Noes:
Smith, Rt Hon Chris (Islington S)	Ms Bridget Prentice and
Smith, John (Glamorgan)	Mr. Jim Dowd.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments) and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House welcomes the measures the Government has taken to build an economy which is healthy and sustainable in the long term, including placing the control of interest rates with the independent Bank of England; notes that over the last 12 months investment has grown by 7 per cent., 14,000 manufacturing jobs have been created and the public finances have been put in order; welcomes the new culture of partnership in industrial relations which is developing within the framework of measures and proposals the Government is taking forward; urges the Government to continue its own productive partnership with both business and employees; and condemns the Opposition for its own record in government of allowing manufacturing to decline within a boom and bust economy of unprecedented proportions and actively and sustainedly destroying partnership and democracy in the workplace.