Manufacturing

HC Deb 14 May 1998 vol 312 cc498-500

2. Mrs. Caroline Spelman (Meriden)

What assessment she has made of the impact of the present exchange rate on British manufactured exports. [40954]

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

The Government understand industry's concerns about the strength of sterling and appreciate the difficulties it is causing exporters and manufacturers, but we are determined not to return to the boom and bust policies of the past. We are delivering a stable macro-economic environment, which will allow business to thrive in the long term.

Mrs. Spelman

Is the President of the Board of Trade aware that manufacturing output has fallen for the second consecutive quarter, thus confirming that the sector is now truly mired in recession? What action will she take to offset bleak prospects for exporters as their contracts come up for renegotiation at the higher rates of exchange?

Mrs. Beckett

I am aware of the figures on manufacturing output and I share the concern that has been expressed, although it is still expected that manufacturing output will rise over the year—indeed it is higher than it was a year ago—and the Confederation of British Industry's latest survey shows that manufacturers expect output to rise over the next four months. As for the action we are taking to help exporters, we have restored support for trade fairs, which was cut by the previous Government; we have introduced a programme called export explorer and a programme to address sales leads on the internet; and we have increased support for trade exhibitions and seminars—all of which follows on from a report by the export forum, which the Government set up to take advice from exporters on work that would help them.

Mr. Denis MacShane (Rotherham)

Is my right hon. Friend aware that there were increased output and exports from the engineering sector in the first quarter of this year and that the fall in sterling resulting from the clarification on the euro has been welcomed by our manufacturing sector? Most important, is she aware that between May 1990 and May 1997 the value of the pound against the deutschmark changed no fewer than 87 times; and that 20 per cent. of the rise of sterling took place in the last 12 months of the irresponsible, flippant, yo-yo currency stewardship of the Conservative Government? They are to blame for any crisis that our manufacturers now face.

Mrs. Beckett

My hon. Friend is entirely correct. On Monday, I was with a very successful British manufacturer and exporter who went out of his way to tell me that sterling has not yet reached the same level as it was under the previous Government. He showed me graphs to show how he had coped with it—by putting the emphasis on value and quality, which is the message of this Government, but not of the previous Government.

Mr. John Redwood (Wokingham)

Far from abolishing boom and bust, the Government have pulled off the unique double of a bust in manufacturing while there is a boom in everything else. Is the President of the Board of Trade aware of the new fears, expressed in the City following the Bank of England's remarks that there will now probably be higher interest rates and a higher rate of sterling, which will do still more damage to manufacturing? What will she tell the Bank, which is blaming the Government's policy of the minimum wage and differential pay awards—and the higher pay that will result—for the threat of higher interest rates and higher sterling that will do more damage to manufacturing?

Mrs. Beckett

The right hon. Gentleman has clearly not paid attention to what the Bank actually said, because it did not say any of those things.

Mrs. Cheryl Gillan (Chesham and Amersham)

It was in the Financial Times this morning.

Mrs. Beckett

I am afraid that the hon. Lady is wrong. The Bank said that the level of the minimum wage is important, that it retains its responsibility and concern for inflation and that it is confident that the policy is on course to deliver lower inflation. It said that it would be necessary to reassess its position and its concerns when the level of the minimum wage is announced, but that it did not intend to reach any conclusions in advance of that announcement—thereby showing a great deal more common sense than Opposition Members.

I do not think that it lies in the mouth of the right hon. Gentleman or his hon. Friends to complain about the level of sterling when they have done everything they could in the past few days to talk up the level of sterling by talking down the possibility of the euro.

Mr. Redwood

The President owes it to business to tell it what the minimum wage will be. It is the uncertainty that she is generating in the markets that is doing the damage. If she told us now what the minimum wage would be, the markets could assess the seriousness of a threatened wage explosion and the Bank could take the necessary action. Will she do that?

Mrs. Beckett

Unlike the right hon. Gentleman, the business community is perfectly well aware that the Low Pay Commission will report in the near future and that the national minimum wage will be introduced in April 1999. There is no worry on the part of business: it knows perfectly well what the timetable is.

Mr. Barry Sheerman (Huddersfield)

Has my right hon. Friend seen the recent KPMG survey that shows that since the value of sterling has been high there has been no increase in the number of firms calling in the receivers—which is very good news? Will she continue her campaign—which is much appreciated on Labour Benches—to make Britain's manufacturers more productive? That is part of the answer. We shall always have problems with currencies going up and down—that is the truth of the matter—but it is essential to make our companies more productive, and we should continue to campaign for that as vigorously as possible.

Mrs. Beckett

My hon. Friend is entirely correct, and he has campaigned on this issue very effectively for a long time. I share his view completely, and we continue to discuss and address the matter.

Mr. David Chidgey (Eastleigh)

Given the damage that has been done to exporters by the recent high value of the pound and the continuing instability of exchange rates, does the President of the Board of Trade accept that the Government must make an urgent and clear commitment about early entry into economic and monetary union? If we do not do that, we shall not provide the confidence and stability that is needed. Will the right hon. Lady impress on the Chancellor that continuing uncertainty is holding back the essential investment that we need in industry, which is not helping to reverse the widening gap in productivity that was mentioned a moment ago?

Mrs. Beckett

I fully understand that that is the view of the hon. Gentleman and of his party, but it is not yet the view of business. Perhaps business will come to hold that view, but the business community—which we consult regularly about such matters—is not expressing it now. Secondly, I remind the hon. Gentleman that in a recent report the Bank of England suggested that, owing to the folly and neglect of the previous Government, it would take some years for British industry even to begin to be ready to go into the euro, should that decision be taken. Thirdly, I remind him that this Government are committed to the triple lock on that decision: Government, Parliament and the people must first decide.

Mr. Geraint Davies (Croydon, Central)

Is my right hon. Friend pleased, first, that the markets are looking towards sterling's depreciation, and particularly that sterling is being sold at DM2.7 in the five years ahead market—partly due to George Soros and others, of course—and converging towards DM2.7; and, secondly, that many of the markets and investors are looking towards interest rates going down, so sentiments in the market are extremely positive for manufacturing exports?

Mrs. Beckett

My hon. Friend is right. The market is forecasting both lower interest rates and a lower exchange rate in the longer term, which suggests that the markets understand—as the Opposition do not wish to understand—that the Government are working for stability.