Manufacturing Industry

HC Deb 16 July 1998 vol 316 cc553-7

1. Sir Teddy Taylor (Rochford and Southend, East)

What recent reports she has obtained on the state of business confidence in manufacturing industry. [49371]

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

I receive numerous reports from business about many aspects of economic performance, including the state of business confidence in manufacturing industry. I recognise that some sections of manufacturing have strong concerns at present, but that it is a more mixed picture than is sometimes suggested. For example, the Confederation of British Industry continues to forecast that manufacturing output and investment will grow both this year and next.

Sir Teddy Taylor

Will the Secretary of State study the alarming report published this morning by the British Chambers of Commerce, which tends to be a more reliable organisation than the one she mentioned? It shows that home sales are at their lowest for six years and that export activity is falling sharply on the last quarter, which was a record low, probably because of the problems in the European Union. Will the right hon. Lady remind the Chancellor that manufacturing activity is vital to the economy and that trying to make himself popular with a spending spree is a great danger if the only result is a further increase in interest rates, which would have a devastating effect on manufacturing industry?

Mrs. Beckett

First, while I bow to no one in my respect for the British Chambers of Commerce and I am aware of the survey, I cannot share the hon. Gentleman's view that the CBI is in some way an unreliable organisation. My right hon. Friend the Chancellor is extremely well aware of the position in manufacturing industry, about which we continue to liaise closely. Far from seeking merely to make himself popular with his announcements on Tuesday, he is laying a sound basis for reform, modernisation and investment in Britain's future. Far from embarking on some sort of spending spree, he is showing considerable responsibility and prudence, but he is also making the right choices to lay the right path for Britain's future.

Mr. Martin O'Neill (Ochil)

First, is not it the case that our right hon. Friend the Chancellor's announcement on Tuesday has gone some way to encourage British manufacturers because, in the public expenditure increases, the emphasis will be on manufacturing and capital matters and we will see the beginnings of a turnround in those areas? Secondly, I do not think that any of us assumes that interest rates will reduce dramatically in the short term, but can we assume that in the weeks and months ahead, as the Government plan for the next Budget, a case will be made for investment incentives so that manufacturing industry can use the space that it has to plan for the future and take advantage of what we assume will be the better trading prospects throughout the world next year?

Mrs. Beckett

My hon. Friend is right to draw attention to the fact that trading prospects throughout the world and the impact of the Asian crisis are in part impinging on manufacturing. He is also right to say that it is important that the manufacturing sector of the economy continues to invest and plan for the future. I am confident that he shares my view and that of the whole Government that some of the announcements made this week—not merely the announcement for investment in the science and engineering base, for example, but the whole basis of the public spending settlement, with its three-year rolling programme approach and the split between capital and current spending—will help to create a climate in which everyone, including business, will feel better able to plan sustainably for the future.

Mrs. Ann Winterton (Congleton)

Is the right hon. Lady aware that the north-west chamber of commerce has consulted its manufacturers, who believe that the outlook is extremely gloomy and that the country will slide further into recession, for which they blame the strong pound, six interest rate rises and an increase in business taxation? Is she concerned that they are reducing the number of people in their work forces and that that will have an adverse effect on the plans announced in the House on Tuesday?

Mrs. Beckett

I am, of course, familiar with the some of the work of the north-west chamber of commerce, and I understand its wish to reflect the concerns and anxieties of its members, but I hope that the hon. Lady, who I know takes a great interest in these matters and wants to be accurate, will remind the House that three quarters of the increase in the rate of sterling took place before the general election and before interest rates were increased. Indeed—although I do not expect her to convey this information—the previous Chancellor should have increased interest rates before the election. People are aware of the concerns of manufacturing, but they are also conscious that the difficulties that are being experienced are a result of what is happening in Asia and of pressures on sterling because of concerns about the euro. The picture is much more mixed than the Conservative party pretends.

Mr. Michael Clapham (Barnsley, West and Penistone)

Does my right hon. Friend agree that the fact that there were 618 inward investment projects last year—the highest number ever—shows that foreign investors believe that the British economy has a stable future? Does she also agree that the £1.1 billion that has been made available to the university science base will help to anchor the pharmaceutical and chemical industries, for example, which rely on their collaboration with universities, and that that will lead to a strengthening of confidence in the British economy?

Mrs. Beckett

I am grateful to my hon. Friend, who is entirely right. There is indeed an all-time record in inward investment projects. As he correctly said, 618 new projects were signed last year, which is the first time that the number has been above 500. That substantial increase is a sign of the confidence of inward investors in the future of this country; that confidence will be strengthened by the Government's announcement of long-term investment to create the basis for prosperity in manufacturing in the future.

Mr. John Redwood (Wokingham)

The British Chambers of Commerce survey that was published today shows meltdown in manufacturing. Meanwhile, private sector earnings are going up by more than 6 per cent. a year. Labour has created a boom-and-bust economy—bust for manufacturing, boom for most of the other businesses. Will the right hon. Lady say how much of the money the Chancellor announced this week will be swallowed up in large, inflationary pay awards as the public sector seeks to catch up with the private sector? What impact will that have on manufacturing prospects? Will she urge the Chancellor, as Conservative Members have repeatedly done, to change policy on tax, interest rates and savings to give manufacturers some relief?

Mrs. Beckett

The right hon. Gentleman has failed to notice that commentators, who have some genuine concerns, have pointed out that recent statistics—on confidence levels and so on—are a repetition of what was shown some five or six years ago. At that time, of course, not only was the Conservative party in power, but I rather think he was in the Government and perhaps even in my Department, so I find his use of the word meltdown interesting, even though it is, of course, nonsense. There are real concerns, which is understandable, but, as I said, the picture is rather more mixed than his extravagant claims suggest.

Output in manufacturing has been broadly flat over the past year—for the past three months it is up 0.1 per cent. on the previous three months, and the volume of exports grew in each of those three months.

Mr. John Bercow (Buckingham)

Do not write home about it.

Mrs. Beckett

The hon. Gentleman may think that 0.1 per cent. is not a massive increase, but I should point out that over the whole history of the previous Government manufacturing output grew, on average, by only 0.5 per cent. a year.

2. Mr. Andy King (Rugby and Kenilworth)

What action her Department has taken to improve the competitiveness of manufacturing industry in Europe during the British presidency of the European Union. [49372]

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

My Department's priority during our presidency has been to promote policies, in partnership with industry, to improve European competitiveness and I believe that we have made a real impact. Key areas in which we have made progress include the single market, research and development, telecommunications and electronic commerce and promoting entrepreneurship and trade liberalisation. Competitiveness is now firmly embedded in the language of Brussels, helped in no small part by our efforts, and I am especially pleased with the profile given to economic reform at the Cardiff summit.

Mr. King

Does my hon. Friend agree that Britain's new relationship with our European partners is already bearing fruit and that it is in stark contrast with the miserable legacy that we inherited from the Tory Government, who succeeded only in reviling Europe and alienating Britain from the rest of the continent? We have a much better future for manufacturing in Britain under the new Labour Government.

Mr. McCartney

I thank my hon. Friend for his kind remarks. It is absolutely correct to say that the Government have begun to turn round the appalling legacy of that rabble over there, who spent most of their time trying to close down British industry, and that we are spending our time building it up. Yesterday, it was announced that Britain is the No. 1 nation for inward investment for the first time ever, and the more than 500 new investment projects are a clear sign that we have the confidence of both the national and the international business community.

Miss Anne McIntosh (Vale of York)

Why was no progress made on the chocolate directive, which has damaged the competitiveness of British chocolate manufacturing?

Was there any discussion during the British presidency of the Commission proposals for compulsory consultation of employees in all companies with 20 or more employees? Does not he expect that to damage the competitiveness of British manufacturing industry?

Mr. McCartney

I cannot give the hon. Lady a definitive answer on the directive but, as someone who enjoys chocolate, I can assure her that nothing will be done under this regime to damage the British chocolate industry. A Mars a day keeps me at bay.

To answer the hon. Lady's clever question, we have made it absolutely clear both in opposition and in government that we will apply subsidiarity. If a Commission proposal places requirements on companies that operate solely within a country's own boundaries, we will oppose it. We are in favour of information and consultation, and the "Fairness at Work" White Paper is a step forward in that direction, guaranteeing employment rights, but if the Commission proposals are made in the form that has been suggested, the Government will oppose them.

Mr. Barry Sheerman (Huddersfield)

We may no longer be president of the European Union, but we can still set an example. In a threatened global economy, have not we set a good example this week? I may or may not be a parliamentary poodle, but I am an unreconstructed Keynesian. Does my hon. Friend agree that we need good old Keynesian investment? The United Kingdom showed the way this week by putting nearly £50 billion into our economy. If that does not stimulate our manufacturing industry, and European industry, nothing will.

Mr. McCartney

Our No. 1 priority both here and in Europe has been employability: co-ordinating policies to deal with the 18 million people who are unemployed in Europe, more than half of whom have been out of work for more than a year. While we have been developing those policies with our European colleagues, the Opposition have fought tooth and nail against the windfall tax and the introduction of the new deal to get young people and older workers back to work. Once again, the Government are doing effective work throughout Europe and in the United Kingdom to get down the appalling levels of unemployment left by the previous Government.