UK Manufacturing and Enterprise

HC Deb 16 May 2000 vol 350 cc164-212

Mr. Deputy Speaker (Sir Alan Haselhurst)

Madam Speaker has selected the amendment in the name of the Prime Minister. She has also decided that there should be a 10-minute limit on Back-Bench speeches.

4.24 pm

Mrs. Angela Browning (Tiverton and Honiton)

I beg to move, That this House condemns the Government for failing to encourage an enterprise economy, for reducing the UK's competitiveness and burdening all sectors of business with extra regulatory costs and taxation and for adding to the pressure on manufacturing, resulting in many sectors relocating outside the UK; demands that the Secretary of State for Trade and Industry outlines the Government's strategy for manufacturing as a matter of urgency, so that industry can plan for the future; and calls upon the Government to commit itself to reduce the overall cost of tax and regulation to business without delay, allowing UK firms to compete in the global market place and to retain a UK manufacturing base. When new Labour came to office in May 1997, the Government inherited an economy in which the Conservatives had reformed our trade unions. We had created an enterprise economy in which non-wage labour costs were some of the lowest in Europe and in which the UK attracted one third of all inward investment into the European Union, creating 850,000 jobs. In 1995, the president of Philips said: For manufacturing, Britain is the most competitive country in Europe today. In October of the same year, the chairman of BMW said: Great Britain is currently the most attractive economy in Europe for producing cars. Since 1997, under new Labour, Britain has dropped from fourth to eighth in the world competitiveness league. Today's debate is an opportunity to examine what has changed and gives the Secretary of State a chance to spell out his Government's policy on competition, manufacturing and business so that companies can plan for the future—something that they are currently having great difficulty with.

Ever since 1997, when the "under new management" sign appeared above the door of the Department of Trade and Industry, one thing has become apparent: although they have learned the language of business, there is precious little business experience in the Cabinet. In the three offices of state that should be making Britain more competitive there is one non-practising barrister, one former politics lecturer turned journalist and one polytechnic law lecturer—the three wise monkeys who even now cannot see or hear what is happening to British industry. They lecture and hector people who every day have to plan, take decisions, invest money and create jobs.

Only today, we read in the Financial Times that in his speech to the CBI tonight, the Prime Minister will signal to business leaders that the Government have broader priorities than appeasing their growing ranks of critics in the business community. The Secretary of State for Defence was clearly telling the truth when he told The Guardian last month that metal bashing is no longer a vital national asset That was a clear message for the Labour heartlands.

The Government's £30 billion of extra taxes and £10 billion of extra regulatory costs have started to impact on British businesses, but apparently the Government have broader priorities. In other words, they have departed from the field of battle and no longer see themselves as champions of British competitiveness. The Secretary of State has failed to be the sponsoring Minister at the heart of Government on behalf of business. The taxes and burdens imposed by the Government cover areas such as the climate change tax, IR35, employment relations, industrial works councils, increased fuel charges, workplace parking, congestion charges, end-of-life vehicles, employment agencies, sub-post offices, residential care homes—the list goes on. No sector has been able to rely on the Secretary of State for Trade and Industry to put its case at the heart of Government. His job, as he sees it from the vantage point of a polytechnic lecturer, is to agree to all the new burdens. It is bad enough that he is constantly rolled over by the Treasury, but to acquiesce to policies that emanate from that seething mass of chaos that is the Department of the Environment, Transport and the Regions gives the impression that he has been dumped by his colleagues. If he is not careful, he could end up as the Labour candidate for mayor of Tyneside.

Mr. Dale Campbell-Savours (Workington)

How is it, then, that unemployment in the United Kingdom is the lowest in western Europe as a percentage of population?

Mrs. Browning

Because of the legacy that the Government inherited. One does not need to be able to work out seven times eight to work out those statistics.

Mr. Peter Luff (Mid-Worcestershire)

I am sure that my hon. Friend would wish to remind the hon. Gentleman that 5 per cent. of all manufacturing jobs were lost in the west midlands last year alone.

Mrs. Browning

Indeed. I shall come shortly to the pressures that manufacturing businesses are under and why they are struggling to maintain their competitiveness in world markets.

Mr. Bruce Grocott (Telford)

rose—

Mrs. Browning

I am delighted to give way to the Prime Minister's Parliamentary Private Secretary.

Mr. Grocott

The hon. Lady implies that Opposition Members possess tremendous business acumen, so could she remind the House of the practical business proposals that she put forward to solve the Rover crisis?

Mrs. Browning

I am happy to answer that question from another polytechnic lecturer. I have said before in the House that, before the Rover crisis broke, a Conservative Member of the European Parliament and former director of Rover, Mr. Malcolm Harbour, wrote—with my consent as shadow Secretary of State—to the Secretary of State to offer the support of the Conservative party in negotiations with the Commissioner in the seemingly endless battle to secure money from Europe. However, the commitment of the Conservatives to try to help the Secretary of State—he shakes his head, but it is true and he has seen the letter—was made more difficult because he did not think that he had a problem with Rover until the news broke. Our commitment to trying to help Rover was clearly on the record of this House.

Business will find a different approach from the Conservative Government after the next election.

Several hon. Members

rose—

Mrs. Browning

I shall give way in a moment, but I first wish to explain to business why it can live in some hope that a Conservative Government will change the mess and chaos. We will reduce the costs to business over the lifetime of a Parliament, because the costs of the regulatory impositions put on business by this Government must be cut. We will guarantee that we will report progress to Parliament, so that business will feel that burden lifting. All that business feels at the moment is regulation after regulation and tax after tax—all imposed at the cutting edge of what makes a business competitive. We will guarantee a low-tax, low-regulated economy, and we will ensure that UK companies are not put at a competitive disadvantage to other EU countries.

Mr. Jim Cunningham (Coventry, South)

While many people at Rover will appreciate what the hon. Lady tried to do, she did not answer the original question. Leaving aside the European grant, what solution did you put forward to solve the Rover crisis?

Mr. Deputy Speaker

Order. I have no solutions to such matters.

Mrs. Browning

The hon. Gentleman asks what solution we would have put forward. The Secretary of State held a press conference to take the credit for a proposal that he suggested ensured the long-term future of Rover, but had Conservative Ministers brokered that deal, we would not have assumed that we had concluded the negotiations. That will be the difference in the calibre of people who will hold office in a Conservative Government, compared with the people in this Administration who have never run any commercial operation, have never risked anything, and have seemingly never even engaged in a negotiation. As any business man knows—and the hon. Gentleman has some experience in that area—a deal is not deal until it is delivered. Indeed, I would say that a deal is not a deal until it is paid for.

The Secretary of State took the credit and then took his eye off the ball and did not follow through. In business, as in Government, following through is critical. I do not suggest that a Conservative Government would have or could have prevented any company—

Mr. Grocott

They were not saying that at the time.

Mrs. Browning

Yes we were. We live in the real world. The people who read and write about things may not know this, but those of us who have had 20 years experience in business—as I have, including 10 years with a British manufacturer—know that nobody should take credit for negotiating a deal until they know that they can follow through and deliver on it. That will be the difference that business can expect from a Conservative Government, compared with the bunch of people in this Government who talk about things they have never actually done.

Mr. Richard Burden (Birmingham, Northfield)

If that is the calibre that we could expect of a Conservative Government, would it be different from that when the Conservatives were in government? They sold off Rover to British Aerospace in a deal that was found subsequently to be illegal under European law. They laid the foundation for the company to be sold on to BMW without any guarantees for the future, thereby putting the knife in the very hands of those who stabbed Rover in the back.

Mrs. Browning

The hon. Gentleman is reinventing history. As someone who has tried to take a constructive role in the history of Rover for obvious reasons, and who I respect at least for his background in engineering, I would have hoped for rather a better question from the hon. Gentleman. If Labour Members have some sensible questions, I shall be happy to take them. However, I hope that the calibre of their questions will improve.

Mr. John Bercow (Buckingham)

Is it not entirely typical of the Government's arrogant and incompetent approach that having agreed in principle to the part-time workers directive as long ago as April 1998, Ministers took 21 months before issuing their proposals to business for the incorporation of the directive? They then gold-plated its contents, and finally had the brass neck to demand a response from hard-pressed businesses throughout the country in less than six weeks.

Mrs. Browning

My hon. Friend makes a pertinent point. On Thursday morning, we shall deal in Committee with part-time work regulations. I look forward to that, because my hon. Friend has rightly observed that despite all the rhetoric, we are faced with yet another burden on business. It has been gold plated but the application and administration of it will be as cack-handed as everything else that the Government have introduced. It is bad enough that they keep adding to the regulations that bear on business, but they do so in such a way that businesses are punished even more severely. That is the inept way in which the Department of Trade and Industry goes about things.

We are looking for a commitment from the Secretary of State that he will learn from the way in which he introduced the working-time directive, for example. My hon. Friend the Member for Buckingham (Mr. Bercow) may not know, but I followed the right hon. Gentleman as a speaker on this very subject when he told a large audience of personnel directors that the Government had learned lessons. Clearly they have learned nothing. Alternatively, perhaps like the Prime Minister this morning, they now find that business constitutes such an irritating lobby group that they really do not care to listen to its concerns.

Mr. Denis MacShane (Rotherham)

The protest from business that I hear most about from south Yorkshire concerns the strong pound—the over-valuation of sterling. If a Conservative Government were to take office, what does the hon. Lady think that the value of the pound should be against the European currency, and what would she do to reduce the value of the pound?

Mrs. Browning

I refer the hon. Gentleman to the Prime Minister's statement this morning. He made it clear that those who are suffering from the difference in the value of the pound from that of the euro should recognise that the problem lies with the weak euro. When there is a difference in value that imposes a great deal of pressure and pain on business, especially manufacturing companies, those firms at the edge that are cutting margins should be able to rely on the Government to set an economic backdrop of low taxation and low regulatory costs, and not to add to their problems. That is the difference between enabling such companies to hang on, or not.

I understand that the hon. Gentleman is an advocate of the failed euro. I hope that rather than asking me questions about what a Conservative Government would do to rescue a currency to which he has so clearly signed up, he will think again and ask himself why he thinks that the euro is so weak. When it was introduced with much acclaim, it was meant to be a world reserve currency.

I sympathise with Labour Back Benchers, but it is ironic that they sign up to policies that fail and then look to Conservatives to solve the problems. It is flattering, but some problem solving would not go amiss on the part of Department of Trade and Industry Ministers. Many of their policies have caused the problems that are affecting business. Mercifully, business will have only about another year, we hope, to last out under the present Administration.

Unlike new Labour, we do not regard manufacturing as old industry and IT as the new industry. I understand that, in the glittery, bauble-like world in which Labour Members exist, everything new and modern is good and everything older or traditional is bad. We believe, for example, that e-commerce has an integral part to play in all industries, and especially in manufacturing, for both sales and sourcing.

The Government talk manufacturing down as an old industry that can now be discarded. They fail to understand the importance of the manufacturing base in this country, the true role of the new technologies being introduced, and the important part that they will play in the future or manufacturing.

Mr. Andrew Miller (Ellesmere Port and Neston)

If the previous Conservative Government had listened to the wise words of the hon. Member for Esher and Walton (Mr. Taylor), they might have something to say about IT, but I have a simple question for the hon. Lady. If what she says is true, will she explain why Vauxhall, which has facilities in my constituency and in Luton, has faith in investing in Britain? That faith is shared by the Quin Glass company in my constituency, which has just announced the creation of 500 manufacturing jobs.

Mrs. Browning

Only this month, Vauxhall publicly voiced its concern about UK competitiveness, specifically because of the burden of regulation imposed by the Government. The hon. Gentleman has Vauxhall factories in his constituency, and I am sorry that he appears to be unaware of that—perhaps he should set up a meeting with the company on Friday morning.

Mr. Miller

Answer the question.

Mrs. Browning

We need no lectures from Labour Members about e-commerce or anything dot.com, as there are enough dotty coms on the Government Front Bench as it is. The Labour Government put the Electronic Communications Bill in a Queen's Speech but then forgot to introduce it for nearly a year. Three weeks before the end of term last summer, the Secretary of State asked the Opposition to nod it through, and we refused. We said that it should be put out to consultation, as it imposed too much regulation and was not what the IT companies wanted.

The Secretary of State followed our advice, and I am glad that he did. We gave the Bill fair passage in all good faith when it returned after the summer recess. We are happy to help out the Secretary of State if he does not know what to do about e-commerce, but we will take no lectures about IT from any Labour Member.

Mr. Miller

The hon. Lady did not answer the question.

Mr. Deputy Speaker

Order. I am sorry to interrupt the hon. Lady, but I have given the hon. Member for Ellesmere Port and Neston (Mr. Miller) enough licence in terms of sedentary comments. I do not want any more.

Mrs. Browning

I want to make a little progress, and then I will try to take more interventions in a moment. I note that we are hearing today from the massed ranks of Labour Members who have no connection with business and industry but who form the collective of lecturers and media people.

The Government also appear to be unaware that global location has become less important. Today, the multinationals can switch manufacturing abroad and still guarantee quality and continuity of supply. Gone are the days when countries in the far east and south America relied on outdated machine tools from western countries. They are well equipped and competitive—and they are competing with us, now.

Directly as a result of new Labour policies, there is now a dangerous haemorrhaging of UK businesses to other countries. The Government have sent more businesses offshore than the hon. Member for Coventry, North-West (Mr. Robinson). Road haulage is just one example of that, and it has been driven out by the highest road taxes in Europe. Before he took his business abroad, Eddie Stobbart stated: We had no alternative—it does not make sense for UK hauliers or the UK economy as less revenue will be raised by the Treasury. What sort of Alice in Wonderland world is it in which the Chancellor taxes a business to the extent that it has to set up abroad to remain competitive, thereby reducing the revenue that he will receive by having such companies based in the United Kingdom?

Petrochemical companies and banks are moving out their international information technology processing to Ireland, the USA and Singapore as a result of the Regulation of Investigatory Powers Bill. As Computer Weekly reported: They are not trying to fight any more. They are just going. They fear the UK simply isn't a safe place for confidential data. The famous climate change tax will add to business costs next year. It will add 12 per cent. to Nissan's energy bill, 16 per cent. to that of British Aerospace and 10 per cent. to that of B&Q. Yet Department of Trade and Industry Ministers do not flinch. Manufacturing will bear the brunt of the tax, with no allowance for previous investment in energy efficiency.

The British Plastics Federation wrote to me saying: The Levy, which will cost our industry over £60 million based on electrical energy consumption alone, is a serious threat to our competitiveness. It is certainly not alone.

The Government face judicial review on the matter of IR35. IT specialists, who develop cutting-edge software, have been forced offshore, while the Chancellor gives tax breaks on hardware. Where is the common sense in that? We will have the hardware, but not the software to go in it. One such gentleman from Yeovil in Somerset wrote to me: We will move to pastures greener very easily and quickly—suddenly money will leak out of the nation, with barely a whisper of warning. Manufacturing has a range of sectors, from food processing to car manufacturing, in which multinationals in particular find it all too easy to relocate. Our national retailers, who once marketed the Made in Britain label, are moving textiles abroad.

Mr. Ian Bruce (South Dorset)

Has my hon. Friend seen, as I have, announcements from electricity companies which, in response to the Utilities Bill, are sacking people as we sit here? Does my hon. Friend know that I tabled a question about how many people have been sacked, and was told that the Minister would let me know shortly? The Government are clearly not in touch with what is happening in this important industry.

Mrs. Browning

It would be charitable, given how much has been said about the climate change tax, to say that DTI Ministers are in a state of blissful ignorance. However, we know that they are not; they are only too aware of how damaging the tax will be to British industry and manufacturing. Yet despite being the sponsoring Department for business and industry, Ministers make no attempt to speak up for business in Government. They certainly do not speak up for business as far as the Treasury is concerned.

Between May 1997 and December 1999, 82,000 jobs were lost in the textiles industry. In 1999, the National Union of Knitwear, Footwear and Apparel Trades estimated that the equivalent of one textile factory closed every day. In its national strategy report, the clothing and textiles strategy group highlighted regulation and its implementation as a major burden on business. Yet the Government do not want to listen.

Mr. Geraint Davies (Croydon, Central)

If things are so gloomy, how did manufacturing output in the last quarter of 1999 reach its highest level ever? Manufacturing, of course, is growing less fast than the rest of the economy, where we have an extra 800,000 jobs. If things are so awful, why do all the statistics look so good?

Mrs. Browning

As the Engineering Employers Federation has pointed out, that increase has been at the expense of margins. That is all right over a short period, but, as a business man, the hon. Gentleman will know that unless manufacturing can see some light at the end of the tunnel, it will not be able to sustain cutting into its margins to keep up productivity for long. That is the worrying long-term future that manufacturing faces.

The present Government wring their hands. They offer sums of money to some areas and sectors and not to others. Perhaps the Secretary of State could explain the strategy. Is it based purely on the map in "The Times Guide to the House of Commons", or is there some higher body that he has applied to in order to identify who does and who does not receive Government handouts? I am sure that many of his hon. Friends on the Back Benches will want to know, as clearly they will need to indicate to their constituents, when the Minister says that this is a Government that will not intervene, whether there is a policy behind that or just political opportunism.

The Secretary of State could intervene much more positively. He could promise British business today that he will halt regulatory costs. The Chancellor could look again at the £30 billion of extra taxes on business, particularly those in the pipeline. If they fail to take action, and quickly, they can be sure that the sign that says "DTI" in Victoria street will be replaced very shortly in the eyes of business with one that says "RIP".

British industry deserves and was promised better than this. Perhaps the right hon. Gentleman will now tell us how he will deliver.

4.51 pm

The Secretary of State for Trade and Industry (Mr. Stephen Byers)

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: 'recognises that industry does not want a return of the boom and bust policies of the previous Government, with interest rates of 15 per cent, inflation above 10 per cent and soaring budget deficits; welcomes the Government's decisive action in taking politics out of interest rate decisions; notes that employment is currently 880,000 higher than it was when the Government came into office, and that long-term interest rates over the past year have been at their lowest for 35 years; welcomes the measures that the Government has taken to encourage enterprise, investment and innovation which particularly help manufacturing businesses; welcomes the Government's view that where firms are in difficulty the Government has a role in helping people through change as opposed to the previous Government's laissez-faire approach; and condemns the Opposition for its record in government, when manufacturing employment declined by 2¾ million.'. The Government fully recognise the challenges that manufacturing faces in a global economy. One of the ways in which we can assist manufacturing to meet those challenges is to provide the economic stability that we now have in the United Kingdom, not because of some legacy from the Conservative Government, but because of the steps that we took on coming to office in the first few days after 1 May 1997, giving the Bank of England independence over interest rates to ensure that we did not play politics with interest rates, which certain right hon. Members opposite may well have done during their time as Chancellor of the Exchequer.

Several hon. Members

rose—

Mr. Byers

I have not started yet. Let me get through my introduction and then I shall be more than happy to give way, even to the hon. Member for Buckingham (Mr. Bercow).

In the contribution of the hon. Member for Tiverton and Honiton (Mrs. Browning), there was no recognition of the situation of manufacturing under the Conservatives. There are figures that demonstrate very clearly that while there may be difficulties in some sectors of manufacturing, as there clearly are, we still have a buoyant and vibrant manufacturing industry here in the United Kingdom. Hon. Members opposite should not talk manufacturing down, because there are real strengths.

Manufacturing productivity is rising by around 5 per cent. a year. Most economic forecasters say that it will continue to rise in the period ahead. Manufacturing export volumes are 9.5 per cent. higher than they were a year ago.

Let us look at those employed in manufacturing. Regrettably, jobs have been lost in manufacturing since May 1997; manufacturing employment has fallen by around 160,000 in the three years since the present Government came to office. But, in comparison, during the Conservative years from 1979 to 1997 an average of 140,000 manufacturing jobs were lost every single year. Every year for those 19 years 140,000 manufacturing jobs were lost, so we shall not take any lessons from the hon. Lady, who was a Minister in the Governments responsible for that record on manufacturing employment.

Between 1979 and 1997, manufacturing employment fell by more than 2.5 million people. That is the Conservative record on manufacturing, a record that we shall remind hon. Members opposite about, and remind the country about as well.

Mr. Ian Bruce

I am grateful to the right hon. Gentleman for giving way. He will know, if he looks at any table of statistics, that manufacturing employment throughout the world was going down during that period. Will he reflect on what was happening to manufacturing jobs in the Conservatives' last few years in power, on the present Government's statement when they came in that they would do so much better for manufacturing, and then on exactly what has happened over the last three years?

Mr. Byers

Government is not like pick and mix at Woolworths. The hon. Gentleman must stand on the record of Conservative Governments—that was their record. When I talk about people losing their jobs, he—with a majority of only 76—gets slightly worried.

Mr. Bruce

It is 77.

Mr. Byers

I apologise—another rather foolish person voted for the hon. Gentleman. However, I can understand his concern.

Mr. Edward Garnier (Harborough)

rose—

Mr. Byers

I give way to the hon. and learned Gentleman, who has a slightly larger majority.

Mr. Garnier

I am most grateful to the Secretary of State. Even assuming—although I do not—that his figures for the years of Conservative government are correct, what will the Labour Government do to put the matter right?

Mr. Byers

I shall outline our approach. I am pleased that the hon. and learned Gentleman's intervention has allowed me to address the point so early. What we are not going to do is take risks with the economy. That is why we are creating economic stability, with inflation under control. We have sound public finance and we are reducing the national debt. That is all in stark contrast to the situation that we inherited when we took office in May 1997. We are creating the economic climate in which business can plan ahead with confidence, knowing that we shall not return to the days of boom and bust that we experienced under successive Conservative Governments.

Mr. Garnier

Will the Secretary of State give me some examples of where that is working?

Mr. Byers

I draw the hon. and learned Gentleman's attention to the announcement made yesterday by Marconi. The company is creating 2,200 high-tech, well-paid jobs in the west midlands. A global company that could have gone anywhere in the world chose to come to the west midlands of the United Kingdom because of the skills of the people in that area and its strengths, and because of the economic environment that we have created. That is why inward investment reached record levels last year. We have created a climate in which people want to invest. We can take pride in that. It is not a legacy from the Conservatives. It has occurred because of the steps that we have taken; the environment that we have created means that businesses want to invest in the UK.

Mrs. Caroline Spelman (Meriden)

Surely the Secretary of State should have mentioned in the same breath that today Massey Ferguson announced that it was feared that 2,000 jobs would be lost at its Coventry factory, because of the difficulties experienced by the company. We should not jump to conclusions; the solution at Marconi may be neutralised by losses in other key manufacturers in the west midlands.

Mr. Byers

It is unfortunate that the hon. Lady did not refer to the whole statement made by the chairman of Massey Ferguson. He said that, if the Government made a commitment to join the single European currency, the company would retain its commitment—[HON. MEMBERS: "Ah."] That is the truth. The company would retain its commitment to stay in the UK.

All those Opposition Members who wear nice, shiny brass pound signs in their lapels should realise that that is a signal to the chairman of Massey Ferguson. It creates the uncertainty that leads him to consider those options. That is the reality; rhetoric about Europe and the single currency is creating uncertainty in the mind of the chairman of Massey Ferguson. A little later in my contribution, I hope that I shall be able to reassure people in his position as to the Government's intentions.

Mr. Jim Cunningham

Does my right hon. Friend agree that, during the past 10 years—especially under the Tory Government—Massey Ferguson shed a large amount of labour, although there were increases in productivity? There has been uncertainty at Massey Ferguson for a long time, as most people are aware. As for the chairman's statement, we all realise that the value of the pound is extremely high and we hope that something can be done about it, but we have not yet heard from the Opposition what they would do about the high pound. The hon. Member for Meriden (Mrs. Spelman) should be careful when she refers to the history of Massey Ferguson.

Mr. Byers

My hon. Friend makes an important point from his personal experience. The chairman's statement was made in the context of the need for certainty about the single European currency.

Mrs. Browning

rose—

Mr. Kenneth Clarke (Rushcliffe)

rose—

Mr. Byers

I have a difficult choice to make—between the pro and anti-single currency wings of the Conservative party. If the right hon. and learned Gentleman will forgive me, I shall first give way to his Front-Bench colleague, the hon. Member for Tiverton and Honiton.

Mrs. Browning

The Secretary of State is a true gentleman. Given that he has clearly had to make a commitment to Massey Ferguson and to companies like it, will he share with the House the reassurances that he has given them about the Government's commitment to giving up the pound and to joining the euro? What time scale has he set and what does he consider to be the optimum rate of exchange when Britain goes in?

Mr. Dale Campbell-Savours (Workington)

My right hon. Friend should take the intervention of the right hon. and learned Member for Rushcliffe (Mr. Clarke) straight away, so that he can combine the answers.

Mr. Byers

My hon. Friend makes a good suggestion. The right hon. and learned Gentleman may want to intervene after I have given a brief explanation.

The Government's position is absolutely clear: we want to join a successful single European currency. I assure the hon. Lady that we have the five economic tests and that we shall evaluate those five tests early in the next Parliament. That is the Government's policy and we intend to follow it.

Mr. Clarke

The chairman of Massey Ferguson would require a rather better answer than that.

The Secretary of State claimed to have created the conditions that he described, but will he return to the main point? He inherited a circumstance in which we were the fastest-growing major economy in the European Union and we were an extremely attractive base for investment in manufacturing and other industry. He faces the charge that his Government have introduced into that situation higher taxation on business and a much higher level of regulation while doing nothing about the excessive value of the pound. Is he aware how complacent he sounds in the light of all the problems faced by huge numbers of manufacturers across the country?

Mr. Byers

I know that the right hon. and learned Gentleman has a vested interest in talking up this Government's inheritance on the state of the economy. However, he will know that the national debt was increasing, that there were real inflationary pressures and that we did not have sound public finances. Those were the difficulties that we inherited when we took office and we have taken action to address them.

Several hon. Members

rose—

Mr. Byers

I shall give way first to my hon. Friend the Member for Workington (Mr. Campbell-Savours).

Mr. Campbell-Savours

The intervention of the former Chancellor of the Exchequer, was very interesting. He put through the Transport Act 1985 and that Act, by itself, was responsible for the total destruction of the whole of the British bus manufacturing industry, including the loss of the Leyland national plant in my constituency that produced 2,000 single-decker buses per annum. His deregulation of transport destroyed the industry.

Mr. Byers

My hon. Friend makes an important point. The facts are worth rehearsing for the benefit of the House. In the early 1990s, almost 1 million manufacturing jobs were lost. Some 70,000 of them were in the motor industry, with 13,000 jobs lost in one company alone—GEC in 1991–92—and 20,000 jobs were lost at Ferranti in the first four years of the 1990s. The hon. Member for Tiverton and Honiton talked about the difficulties being experienced by the textile industry. I accept that there are difficulties, but they pale into insignificance when compared with the fact that, in 1992, more than 1,000 textile and clothing manufacturers went bankrupt—three for every single day of the Conservative Government that year. That is the record of the Conservatives.

The hon. Member for South Dorset (Mr. Bruce) raised the issue of international comparisons and it was a point well made. When one considers the levels of manufacturing output or of manufacturing employment in the other major industrialised countries—whether the United States, Japan, Germany or France—all of us, including the United Kingdom, have witnessed a decline in manufacturing employment and in the contribution that it makes to the gross domestic product. We are not alone in the reductions that have taken place. When people argue about levels of employment in manufacturing, we should remember that it is a decline that has taken place in most industrial countries over the 15 past years or so for reasons that most Members understand.

Mr. Bercow

The Secretary of State simply did not answer the point made by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). Given that the Confederation of British Industry, the Institute of Directors, the Federation of Small Businesses, the Forum of Private Business and the British Chambers of Commerce—to name just five representative business organisations—have all recently attacked the Government for dramatically increasing the regulatory burdens that threaten small business competitiveness, why does the Secretary of State continue to insist that he is right and that they are all wrong?

Mr. Byers

In the debate about regulation and the burden of red tape, a balance needs to be struck between setting minimum standards for genuine entitlements for people in the workplace and red tape and bureaucracy. Of course, Opposition Members confuse the two. The hon. Member for Tiverton and Honiton quoted the cost of regulation as £10 billion, which she took from a survey conducted by the British Chambers of Commerce. However, she did not mention that £6.6 billion of that is the cost of providing an entitlement to four weeks' paid holiday a year. Conservative Members, including the hon. Lady, call that a bureaucratic burden.

More than 3 million people who benefited from that entitlement will note with interest what the hon. Lady said on behalf of the Opposition. For Conservative Members, £6.6 billion means an administrative burden and red tape, but for people in work it is four weeks' paid holiday a year. We call that decency in the workplace, but Conservative Members talk about a bureaucratic burden on business. That is the difference between our two parties: Conservative Members should give some thought to that.

I was interested to learn that the hon. Lady launched the commonsense revolution for small business last week. She spoke about exempting from the whole raft of employment legislation small businesses, which are defined as those with fewer than 10 employees. If I am not right, I stand to be corrected.

Mrs. Browning

That is not right, although it was reported in one newspaper. However, in our "Commonsense Revolution", in which we said that we shall reduce the cost of the burden on business, we said that we shall use the American system, which we have studied carefully, to exempt small businesses. The basis of the exemption will depend on the nature of the legislation. In some cases, it will be based on the number of employees, but in other cases it may be more appropriate to base it on the turnover of the business.

However, the Secretary of State and small business can be sure that we shall follow the American system to which the Prime Minister pays lip service, but does not emulate. We shall make the country competitive and ensure that the Department of Trade and Industry once again stands for enterprise in relation to such regulation.

Mr. Byers

Given the hon. Lady's hostility to the principle of the national minimum wage, are we to take it that small firms will be exempt from paying their employees the national minimum wage? [Interruption.] We shall hear that comment in a second, I dare say. Four million people work in firms with fewer than 10 employees, but she cannot give them a guarantee that they will continue to be entitled to receive the national minimum wage. That is the Conservative threat to those on low incomes who receive the national minimum wage; the Opposition cannot guarantee that it will be retained.

The working time directive and entitlement to four weeks paid holiday a year are also under threat from Opposition policies. That should come as no surprise, because Conservative Members are concerned about red tape and bureaucratic burdens on business, not common decent standards.

Mr. Jim Cunningham

rose—

Mr. MacShane

rose—

Mr. Byers

I give way first to my hon. Friend the Member for Rotherham (Mr. MacShane).

Mr. MacShane

Is my right hon. Friend aware that one of the heaviest burdens faced by businesses in the United States and Europe is having to pay employees' health insurance costs? Are not some of the most sinister threats to the UK's business competitiveness the plans to privatise the national health service and impose health costs on all employers? The Opposition argue for that continually.

Mr. Byers

My hon. Friend makes an important point in his usual highly effective way.

Regulation involving red tape and administrative burdens is important and we shall take steps to deal with that.

Mr. Ian Bruce

What about the weak euro?

Mr. Byers

The hon. Gentleman asks about the euro, and it is time to address the single currency.

Mr. Bercow

rose—

Mr. Nicholas Winterton (Macclesfield)

rose—

Mr. Byers

I am sorry, I must get on to the single currency, about which many hon. Members feel strongly. However, before doing so, I shall give way to my hon. Friend the Member for Coventry, South (Mr. Cunningham).

Mr. Jim Cunningham

Does my right hon. Friend agree with my interpretation of the silence on the minimum wage of the hon. Member for Tiverton and Honiton: that a future Tory Government would return people in my constituency to working for £1 an hour? Is that what she is really saying by her silence?

Mr. Byers

The implication of the hon. Lady's position is exactly that. My hon. Friend makes a significant point about the threat that will hang over people who receive the national minimum wage in the event of a Conservative Government.

Mr. Bercow

rose—

Mr. Byers

I have a difficulty; I know that the hon. Member for Macclesfield wants to intervene, so I shall give way to him first.

Mr. Nicholas Winterton

The Secretary of State is coming to the single currency and the euro. Will he comment on remarks made to me only a little earlier today by a very senior executive of Nortel, the highly profitable electronics company that employs more than 11,000 people in this country and wants to employ several hundred more? He said to me, "My company isn't that concerned about the strength of sterling. We are concerned about the over-regulation in Europe and the high social costs in Germany and France. May I make a plea to you to urge the Government not to go down the path of Germany and France? We want a light hand of taxation and of regulation. Given that, we will continue to expand in the UK." That is rather different to the case that the Secretary of State quoted of Massey Ferguson.

Mr. Byers

I was almost distracted by the hon. Gentleman's pound lapel badge glinting in the light. The gentleman from Nortel makes a strong point. There is no doubt that a Europe based on regulation, directives and negative attempts to control is not the Europe that will be right and fit for the 21st century. That is why the outcome of the Lisbon summit at the end of March was so significant. It set a new direction on Europe—a Europe that recognises the importance of competition and enterprise and that is prepared to lift barriers to ensure that we achieve such objectives.

Mr. Campbell-Savours

I agree with my right hon. Friend that Lisbon is absolutely the key. May I take him back to his earlier remarks? What he said will come as a shock to millions of people in this country. Is he saying that he cannot get an assurance from the Conservative party that it will not exempt small businesses from the national minimum wage? If he is saying that, and we do not hear such assurances, major news is being made in the House of Commons. The issue affects millions of people, and they should know exactly what is being said and what is being planned. I appeal to my right hon. Friend to press the Conservatives. Let us have the truth now.

Mr. Byers

The hon. Member for Tiverton and Honiton has already disclosed the policy, which is exactly as my hon. Friend has described. There has been no attempt to disassociate the Conservative party from the points that he made. The position is absolutely clear. We know that the debate in the Conservative party about the minimum wage is still being fought by certain members of it, including the hon. Lady, who speaks on such matters for the party.

Mr. Campbell-Savours

On a point of order, Mr. Deputy Speaker. I wonder whether it could be noted in Hansard that when those exchanges took place, the Opposition Front-Bench team—

Mr. Deputy Speaker

Order. The hon. Gentleman must know by now that he must not pursue points of debate through bogus points of order.

Mr. Campbell-Savours

rose—

Mr. Deputy Speaker

Order.

Mr. Byers

I want to turn to the question of—

Mr. Bercow

Will the Secretary of State give way?

Mr. Byers

No, I want to make some progress on the question of the relationship between sterling and, in particular, the single European currency.

Mr. Bercow

The right hon. Gentleman promised that he would give way.

Mr. Byers

I did promise.

Mr. Bercow

The Secretary of State, for all his failings, is exceptionally courteous and I am very grateful to him. Given that the United States has been so much more successful over a period of 30 years than the European Union in the creation and retention of private sector jobs, why, in considering parental leave policy, was not the Secretary of State sensible enough to reject the parental leave directive of the EU and instead to copy the provisions of the Family and Medical Leave Act 1993 from the United States?

Mr. Byers

Because I took the view, for better or worse, that a parent who works in a firm that employs 10 or 15 people should have the same rights as a parent who works for a firm that employs 500 or 1,000 people. Their parental responsibilities are the same and people should not be denied the opportunity to look after their children in an appropriate way simply because of the size of the firm for which they happen to work. The hon. Gentleman might disagree with that approach, but I think that it was the right one to take.

On sterling and manufacturing, I understand the difficulties that the current fall in the euro is causing some sections of British industry, especially manufacturing. The current euro-sterling exchange rate cannot be justified by any view of long-term economic fundamentals. Some argue that joining the single currency would end the difficulties that the euro's weakness is creating for some exporters. That was the point made earlier today by the chairman of Massey Ferguson.

The Government's policy is clear. It was stated by my right hon. Friend the Chancellor in October 1997 and by my right hon. Friend the Prime Minister in early 1999. The crucial factor underpinning any Government decision on joining the single currency is whether the economic benefits to the United Kingdom from joining are clear and unambiguous. Britain should be part of the single currency, provided that the economic conditions have been met and the people have given their consent in a referendum—but the five economic tests laid down by the Chancellor have to be met. We shall judge whether the five tests have been met early in the next Parliament. If the economic tests are satisfied, we should join the single currency, if that is what the Government, Parliament and the people decide.

Unlike the Conservatives, we do not rule out joining the single currency for an indefinite period even if, during that time, it was in the national interest to join. Nevertheless, it is vital that we do not, by default, drift back to a policy of wait and see, as to do so would be to deny a genuine choice to the British people. Therefore, we need to re-affirm our commitment to prepare and decide. We shall not allow political dogma to triumph over the national interest. We shall put the interests of our country and of our businesses first, and provide the British people with the opportunity to exercise a genuine choice in an important area.

Mr. Matthew Taylor (Truro and St. Austell)

Does the right hon. Gentleman believe that the convergence test includes the issue of the exchange rate—currently uncompetitive—and the need to have a more competitive rate for entering the single currency?

Mr. Byers

Clearly, that will be one of the issues that we shall have to take into account in connection with the five economic tests.

Mr. Geraint Davies (Croydon, Central)

Will my right hon. Friend give way?

Mr. Byers

No, because I want to make progress lest I detain the House too long.

Business regards the UK as a good location, and global companies choose to locate here. A recent foreign direct investment confidence index identified the UK as the second most preferred destination after the United States for foreign direct investment. In 1998, we had record levels of foreign direct investment. Not only is inward investment increasing, so are exports. The latest World Trade Organisation figures show that, last year, the UK remained the fifth largest exporter of goods in the world. Last week, the Economist Intelligence Unit published its annual assessment of the best locations in the world to do business. The study, based on factors including policies towards enterprise and taxation, concludes that Britain's prospects for the next five years exceed those of the United States, Canada, Singapore, Germany and France. That is the environment and climate that the current Government have created.

The Conservatives' policies are becoming clearer. They complain about the value of the pound, but then the Shadow Chancellor says: We have to get used to the idea that a strong currency is not a bad thing. They rule out joining a single currency for an indefinite period—even if joining is in the interests of manufacturing. They say that taxes should be lowered by billions, but they do not identify which elements of health or education should be cut. They say that the burden of regulation should be reduced, but the main burden they cite is the cost of paying a minimum wage and giving four weeks' paid leave a year. Decent standards are under threat from the Conservatives. Of course, when they were in government, they pursued short-term objectives that led to recession twice during their period of office.

In contrast, this Government are pursuing policies that will attract record levels of inward investment and produce rising exports and increasing productivity. Ours are policies for the long term—policies to challenge the status quo and ensure that we have economic stability.

There are no quick fixes. Stability will take root over time. We need long-term solutions to tackle the long-standing problems that have held us back for too long. That is the goal that we have set ourselves in government, and it is a goal that we will achieve.

5.20 pm

Mr. Kenneth Clarke (Rushcliffe)

I begin by making a declaration of interest—I am a director of a number of public companies, some of which have manufacturing interests in the United Kingdom.

As I said earlier to the Secretary of State, I found his speech unbelievably complacent. He tried to create a rather fictitious version, as I would have said in other circumstances, of the way in which he has moved from where he took over to where he is now. He insisted on using statistics gathered over an 18-year period, taking in two recessions—the last of which was many years ago—in order to try to demonstrate that the Government had taken over a difficult situation.

The fact is that the Secretary of State and his Government took over the fastest growing major economy in western Europe. The United Kingdom was an extremely attractive place for manufacturing and other investment. Stable economic conditions were in place and we were committed not to return to boom and bust. However, conditions have since deteriorated.

The background to the Secretary of State's speech today is that manufacturing industry in the United Kingdom is bleeding as it has not bled for the best part of 20 years. The principal cause of that is the high value of sterling against other currencies, particularly against the euro. In my opinion, the value of sterling is also too high against the dollar, as I shall go on to argue.

Of course, the problems in manufacturing industry, like the problems in all economic policy, are not caused by a single factor. I strongly agree with the remarks made by my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) about the way in which the Government have produced an excessive burden of taxation on business generally in this country, and the fact that they are introducing an ever-heavier regulatory burden. Both of those are damaging a great deal of the competitiveness of British industry. That is one of the changes that has come about with the change of Government. I spoke on both matters—making the same points, but not as eloquently as my hon. Friend—in the debate on the Finance Bill.

However, the principal problem facing manufacturing industry in the UK, which is driving many good and competitive companies ever nearer to the wall, is the excessive strength of sterling on the foreign exchange markets. The problem is rarely dealt with as clearly as that by either Front Bench. There is a rather curious agreement—I shall not call it a conspiracy—between the two Front Benches that the strong pound should not be referred to quite so clearly, when it is raised indelicately by the hon. Member for Rotherham (Mr. MacShane), by me, or even occasionally by a Liberal Democrat. Apparently, that is a problem on which too much stress should not be laid.

The Government's motives for not speaking too much about the strong pound are that they like to pretend that, as we have just heard, all is now perfect in the economic world thanks to the brilliance of our present Chancellor of the Exchequer and his colleagues. I regret to say that I believe that there are those on the Opposition Benches who sometimes like to think that everything is going quite well for the British economy, thanks to the fact that we have not yet been able to join the single currency.

Whatever one's views on that, if we have a floating exchange rate—on any view, we are living with a floating exchange rate now and will continue to do so, certainly until after the next general election—we must address rather more carefully the fact that the exchange rate has floated to a level that is positively damaging to the country. It is damaging to the competitiveness of most companies trying to sell goods and services into the European market in particular, and if we are not careful it will damage the very prospect of keeping Britain an attractive place in which to make things. That is an extremely serious issue which deserves to be tackled, not simply dismissed in some of the knock-about that passes for debate, especially on European affairs, in this country.

There is a desire, on both sides, to dismiss the critics. Business men have repeatedly pointed out the effects of the strong pound on their business. The Government, led by the Prime Minister and supported by the Bank of England, insist on treating such criticisms as the whingeing of industrialists faced with strong currency conditions. It is implied that those of us who criticise the strong pound and the inactivity of the Government and the Bank somehow lack moral fibre and do not realise that robust and competitive industry has to take such problems on board.

There is another response from this side of the House to the critics—

Mr. Byers

Will the right hon. and learned Gentleman give way?

Mr. Clarke

I have only 10 minutes to speak, and therefore do not believe that I should give way.

Critics of the strong pound are told by many Opposition Members that the problem is the weak euro, not the strong pound. The relationship between the two currencies is thus said to be an entirely one-sided problem. That is a simplistic approach to the problems of the foreign exchange market. When any two currencies move, the reasons for that are to be found on both sides.

The euro is weaker than it should be. It has progressed beyond the early stages, when it was a positive advantage to the European economy and enabled the German and Italian economies to avoid recession and begin to grow. The European central bank and European Governments should tackle the issue and try to accelerate the process of restructuring and reform, although those are currently progressing very quickly.

However, we cannot so simply dismiss the genuine problems that the strength of sterling causes. We cannot simply wring our hands or adopt a state of denial as a nation in the face of our business critics. I shall not go into the issue of Rover and BMW. I am very critical of BMW and I do not believe that it can be used as a clear illustration of the consequences of sterling's strength, although that strength undoubtedly contributed to the extent of the losses that BMW suffered. In fact, the case of Ford in Dagenham is extremely illustrative of the problem.

Today, the Financial Times reports that Nick Scheele, the European chairman of Ford, is calling for the Government to make a more detailed and immediate commitment to joining the euro at the healthier exchange rate of DM2.50 to DM2.60 to the pound. Yesterday, before today's announcements of closures, Robert Radcliff, chairman of AGCO—which owns Massey Ferguson—warned that the Massey Ferguson plant in Coventry may have to close if the pound remains high and Britain fails to commit itself to the euro soon.

I shall not refer to the remarks of Mr. Toyoda or the well-known opinions of the president of Sony. These are all high-profile manufacturers, who reflect the views of many people from traditional engineering and manufacturing industry in the midlands and elsewhere. One has only to consider the potteries to realise what is happening to industry there. We already know the consequences for the textile industry. Those companies are not simply whingeing.

It is impossible for manufacturing industry to cope straightforwardly with a move from DM2.50, which was typical when I was Chancellor of the Exchequer, to DM3.40 to the pound, which is sometimes the case now. The movement of the pound from its trough in 1995 to its peak on 3 May is 37 per cent. It is no good telling people that they should respond with higher productivity to such a rapid move in their competitive position.

Instead of simply saying, "This is no problem of ours," the Government should do two things. First, they should have a tight fiscal policy to make it easier for the Bank not to have to continue to raise rates. Having committed themselves vaguely in the Budget to going beyond the tightness of the first two years, and given the Prime Minister's recklessness on David Frost's couch, which committed us to so much spending in advance, this year's comprehensive spending review will have to be very tight indeed.

The Bank must accept that the deflationary consequences of sterling at its current level are severe, despite the fact that our growth is below the European average. The euro has weakened because growth in Europe is weak compared with America's runaway economy. However, we do not have America's runaway economy, although we do have high interest rates and we do have a strong pound. It is time that the Bank, which does not talk about such matters—

Mr. Deputy Speaker

Order. The right hon. and learned Gentleman's speech is time limited.

5.31 pm

Mr. Richard Burden (Birmingham, Northfield)

In the light of recent developments in the motor industry, especially at Longbridge and Rover, it is important that I make a brief contribution. I am pleased that I have been called several times to speak on those matters, but before I make some general comments on the manufacturing issues that arise from them, I must pay tribute to Labour Members with constituencies in the west midlands. They have participated greatly throughout those discussions, they have been tremendously active and they have given enormous support.

I also pay tribute to the right hon. Member for Sutton Coldfield (Sir N. Fowler). I hope that that does not embarrass him too much, but he is a member of the Rover taskforce and has played a positive and constructive role in it. It is important to acknowledge that his approach has moved beyond the petty politics in which Opposition Front Benchers sometimes indulge on those issues, which have often been talked about as Longbridge matters. They are not; they have affected all Rover plants, whether at Solihull, Cowley in Oxford, Swindon or the research and development centre at Gaydon. It is important to place that on record because much has been said about what will happen at Longbridge with Phoenix, but there is a guarantee that staffing levels at Cowley—on which the Chief Secretary to the Treasury, my right hon. Friend the Member for Oxford, East (Mr. Smith), has been active—will be maintained when production of the Rover 75 moves from Oxford to Longbridge.

I shall comment on three matters that arise from the Rover experience. The first is partnership. The hon. Member for Tiverton and Honiton (Mrs. Browning) said much about burdens on business and excessive regulation. My right hon. Friend the Secretary of State made the good point that when the Conservatives talk about that, they are referring to people's rights at work. He referred to parental leave in particular. I want to mention another set of rights that are especially pertinent to the Rover saga, because the hon. Lady criticised the European works council directive as an excessive burden on business. In fact, in this country, even under the improvements that the Government have introduced, it is simply easier not to consult workers about their future; sacking them is often easier than in other parts of Europe. The Conservative approach would weaken those protections still further.

The extent to which the trade unions in the Rover saga were able to exert any leverage over the past few weeks related to the improvements that the Government made to the TUPE regulations, which would be weakened by the Conservatives. We must be aware that there will be a greater chance that problems similar to those at Rover will arise if the Conservatives get their way on employee protection.

It is important to pay tribute to the trade unions in the Rover saga for playing an exceptional and positive partnership role. They have been actively involved in the Phoenix project, and I am very proud that it will lead to one of the biggest ever employee stakeholdings in a major company in this country. That is a positive step forward and Opposition Members should learn the lesson that consultation—the involvement of the work force—is not the foe of business; it is very often its friend.

The second issue is that it is sometimes suggested that there is a conflict between our traditional manufacturing industries and the industries we look to for the future. I think that the Rover saga has shown that there is not, and cannot be, an "either/or" in a manufacturing country such as the United Kingdom. That is why it was right to stand by Rover and its employees, and right for the Government to help to facilitate the deal that was finally reached with Phoenix; but it was also right to establish a taskforce with the aim of diversifying and modernising the regional economy.

The taskforce produced clear and specific recommendations. Even in the area surrounding the Longbridge plant, it was suggested that it would be possible to create a high-technology corridor that would not be separate from the motor or automotive industry, but would build on its strengths and also build bridges to the high-tech industries of the future. Yesterday's announcement about Marconi is a further example of that forward-looking approach.

Thirdly, I want to say something about the exchange rate and the role of our banking system. Does anyone who speaks to manufacturing exporters, particularly those who wish to export to Europe, know about the problems caused by the relative strengths of the pound and the euro? Real damage is being inflicted. Although some firms—often they are the smaller firms—do all that we ask of them in terms of raising productivity and improving procedures, if productivity increases are then wiped out by fluctuations in the exchange rate those firms will still face problems, however forward looking and productive they may be.

There are no easy answers. Certainly, the answer does not lie in encouraging the idea that the way out is ruling out closer co-operation with the euro, thereby creating the impression that sterling can be the ultimate hedge currency of the future. That will make the situation worse, not better. We must, however, deal with the problem involving the banks.

Increasingly, multinational companies insist that their suppliers in the motor industry and elsewhere enter into contracts involving euros, and do their business in euros. That is understandable, and it accords with the way in which such companies work. Incidentally, it is also why much of what is said by the Opposition is so irrelevant to their needs. Is it right, however, for the risks associated with such transactions to fall, as they all too often do, on the manufacturers involved—for instance, components firms?

Perhaps there is a lesson for the banks. Perhaps they should consider operating in euros when negotiating with manufacturers. If we are looking to the strength of our manufacturing and components sectors, perhaps the risks can be shared. If they are not shared, there will be consequences not just for small firms, but for our manufacturing sector as a whole—and that means consequences for our economy as a whole, which will affect our financial sector as well as our manufacturing sector.

I hope that the banks will think about how they can play a more proactive role in helping firms through the problems that they are experiencing with the exchange rate. I think that if the approach is right, some of the more forward-looking financial institutions may respond. The Rover taskforce has already produced forward-looking ideas about how banks and financial institutions could involve themselves with the problems—hopefully, they will not be so great now that Phoenix is taking over—that are likely to occur in the components sector following massive shocks to its orders as a result of the winding down of Rover orders. I think that we can build on the work produced by the taskforce partnership—facilitated and encouraged by the Government—and apply it more generally.

For years this country had a bank that was not independent, while Germany had a bank that was independent. Let us consider the way in which the two institutions operated and their relationships with regions and industry. The independent German Bundesbank was much more inter-dependent with the needs of industry than our non-independent Bank. We now have an independent Bank; giving it independence was exactly the right thing to do. We need to talk with the Bank about how its structure can link much more naturally and exactly with our industrial regions because they are inter-dependent in economic terms. Structurally, changes could be made to allow that to happen.

I do not want to get to a stage where there are problems—perhaps such as those at Rover, or other problems—and we need to go to the banks saying, "How can you help?" I want the institutions and culture to be in place, with the banks coming forward and saying, "How can we help? It is our problem. We know about it and we are involved." We need to think more creatively about how to reform our banking system to reflect that.

5.40 pm

Mr. Matthew Taylor (Truro and St. Austell)

I came to the debate at only a few minutes' notice because the wife of my hon. Friend the Member for Twickenham (Dr. Cable), who speaks on trade and industry matters, has been taken ill. He had to go to hospital with her immediately before the start of the debate. If my speech is a little rough around the edges—if no less passionate for all that—I hope that the House will excuse me and understand my hon. Friend's situation. Later, I have to go to the Confederation of British Industry. To make that appointment and to do a couple of other things, I may need to leave before the end of the debate. I hope that the House will excuse me in the circumstances.

As Conservative Front Benchers have argued, a wide range of issues is undoubtedly hitting industry at the moment. Some of them relate to burdens that the Government have introduced.

Some of those burdens, as the Secretary of State argued, are legitimate. Only a handful of businesses sought to avoid them in the past, but they were wrong to do so. It is right to seek to ensure that people are paid at least a floor basic minimum wage and floor basic holiday entitlements. Although they are undoubtedly burdens, most businesses always took them on. If all businesses have to take them on, responsible employers will feel that all businesses will fight on a far fairer basis.

There are burdens that should not have been imposed. We argued that paying the working families tax credit through employers and payrolls was a burden that was not right for business. We said that the principle that the Government were trying to extend was right, but not the mechanism. We note that the Chancellor has—almost before the thing is up and running—already announced that that process will end. He has acknowledged the problem.

As the right hon. and learned Member for Rushcliffe (Mr. Clarke) has said, the extraordinary thing about the debate is that those on the Front Benches skirt around—or avoid altogether in the case of the Conservative Front-Bench team—the issue that is really hurting manufacturing. It is the case, as Ministers argue, that much of the economy in Britain is doing well; there is no doubt about that. It has been doing well for some time and it continues to do so, but the sectors that are being hit are those that rely on a competitive exchange rate: those involved in manufacturing and in basic resources.

Those sectors include large industries such as the English china clay industry in my constituency. It is in a highly competitive environment, selling a product that is matched by others throughout the world, although perhaps not quite at the same high quality. However, the raw material is sold by many. Price is absolute for such industries, yet they have been hit by the exchange rate change.

Small businesses in my constituency, such as those owned by Svedala, which manufactures pumping equipment, are also being hit. Jobs are being lost. The problem involves Sweden and South Africa, too, to take examples outside the euro. It is not simply a euro exchange rate problem. Parent companies are transferring jobs out because they simply cannot make it pay to manufacture in this country, although Svedala, the parent company, acknowledges that, in Charlestown, it has the highest-quality plant and comparable, if not better, rates of productivity.

Those are not the issues. The issue is the sterling exchange rate, yet next to nothing is said on that by Conservative Front Benchers because they have no solution to offer. They have ruled out the one thing that might make a difference in the long run, which is to take away most of the problems for most of our trade, which are to do with exchange rate fluctuation, by looking towards the euro.

Conservative Front Benchers have also ruled out even the types of tools used by previous Chancellors of the Exchequer to take on the exchange rate, because they have a bizarre fantasy of being able to increase expenditure while cutting taxes. Such a combination would of course only help to make the problem worse—by running up huge deficits and further stoking the economy. Eventually, such a policy would lead to a crunch, when it became apparent that the figures did not add up.

Government Front Benchers also have not addressed the entry issue, because they will not deal with the one measurable, hard condition for entry—a competitive exchange rate. They are afraid that they might get caught out on the euro debate by mentioning measurable criteria, which they think could eventually prevent the Chancellor from announcing that all is well and that we should join. Ministers will go to any length—at least on this side of a general election—to avoid that debate. However, the cost of avoiding it is being paid in the jobs that are now haemorrhaging from manufacturing industry.

Not only jobs are being lost; whole businesses, and parts of businesses, are going bust. They will not return, as we know only too well from the two previous occasions—in the early 1980s, and in the early 1990s—when high exchange rates knocked out some of our businesses. Only the situation in the very early 1980s was at all comparable to the present one, and the then Conservative Government's response to it was precisely the same as the current Labour Administration's response now—to say, "We cannot buck the markets. The markets are king, and we cannot take them on."

Eventually, however, the early-1980s currency situation was reversed, as always happens in speculative markets. Sentiment changed and—hallelujah!—the pound decreased in value. The only problem was that businesses were permanently lost, as were investment opportunities and an opportunity to take an industrial lead in many sectors. Hon. Members have already mentioned some of the businesses that simply no longer operate in the United Kingdom.

Some people proudly wear on their lapel a little gold pound badge. The irony is that they are the ones who are arguing that the high pound demonstrates sterling's success and proves that we should never join the euro. Previously, precisely the same people argued that we had to leave the exchange rate mechanism, which locked the pound into a fixed relationship with permanently high currencies. Nevertheless, along came white Wednesday and—hallelujah!—the pound fell.

The truth is that those who adopt the little gold lapel badge want to lock us into being the tail on the dog, endlessly wagging one way and then the other. Nevertheless, economically, we are attached to the dog. We cannot escape the fact that, particularly for manufacturing industry, Europe is our market; that every exchange rate fluctuation will hit our industries; or that such fluctuations will lead to boom followed by bust followed by boom. Those people cannot acknowledge that avoiding such fluctuations and cycles is the fundamental reason for seeking to be within the shelter of the euro. If one has to be attached to the dog, it is far better to be in the brain than knocking about as part of the tail.

We also hear both Conservative and Government Front Benchers argue that sterling's strength is due to the euro, not to sterling. They say that sterling's exchange rate demonstrates its strength, and that, if anyone needs to sort out their house, it is those who are in the eurozone. That may or may not be true. However, a few years ago, when the Federal Reserve chairman was approached by European countries complaining about the dollar's weakness and the consequent damaging effects on the European economy, he said, "It may be our dollar, but it's your problem." There is a precise parallel there in sterling's high value.

The Engineering Employers Federation spells out the situation very well in its press release, which states: Although output has increased, market share continues to be lost. Export orders continued to fall for the thirteenth consecutive quarter. Export margins are at 25 year lows and imports continue to gain ground…The latest official figures show manufacturing investment was down 13 per cent. in 1999 quarter four on a year ago. The strength of sterling and the associated squeeze on margins and cash flow is forcing firms to adopt a short-term view…Productivity rising strongly in both manufacturing…and engineering…but this is being achieved entirely by cutting employment rather than through increased investment. Those improvements do not match the problems caused by the current exchange rate fluctuation. The briefing note also points out that the rate of increase in engineering production in western Europe in 1999 was double that in 1998, but British companies have been unable to exploit those opportunities, with engineering in Britain advancing in 1999 by only a third of the average increase for western Europe. Of course, our economy is broader than just the great manufacturing industries, but the pain is hard in those industries and the consequences will be permanent if we do not seek to change things now.

Manufacturing is not the only sector with problems. Farming, which we hear a lot about from the Conservative Front Bench, has been hit for six by exchange rate fluctuations, as has foreign tourism, which is a key industry in many Conservative seats, as in many Liberal Democrat seats. As the right hon. and learned Member for Rushcliffe has already pointed out, this is not simply an issue of the eurozone. The value of sterling has appreciated against all but four of the UK's top 30 trading partners. Switzerland, which is not in the euro, but is linked to Europe, is not suffering the same problems. South Korea, Australia, Malaysia and South Africa are all countries not locked into the euro, but sterling is appreciating against them. We are being hit for six in our markets around the world.

The consequences are spelled out by people with the highest levels of experience on all sides.

Mr. Kenneth Clarke

Does the hon. Gentleman agree that we are even at the wrong parity against the dollar? People tend to argue that there cannot be any great problem, because our parity against the dollar remains unchanged. The American economy is outperforming ours. Its growth outstrips the European average and we are growing below the European average. Remaining at parity with the dollar without matching the US performance puts us at a disadvantage that other European countries are not suffering.

Mr. Taylor

The right hon. and learned Gentleman is right. The real lesson is that exchange rates are determined by speculators. Provided that they bet the right way today, they will make their money today. An economy needs a stable exchange rate, but the speculators who dominate the market in sterling need movement. They are getting that movement and making money, but they are putting hundreds of thousands—potentially millions—out of work.

The Financial Times on 5 May quoted Digby Jones of the CBI as saying that sterling was a major issue for tourism and farming, as well as manufacturing. He said: I talk to a lot of businesses, and a lot are taking decisions either to look elsewhere, or not to do it at all…British companies are postponing investment projects or locating them in the euro-zone because of the strength of sterling. On the other side, the comments of TUC general secretary John Monks have been echoed by many trade union leaders. On 4 May, he said: the problems caused by the overvalued pound and the impact it is now having on manufacturing, exporters and the tourist trade will not go away. It cannot be right that neither the Government nor the Bank of England will take any responsibility for the exchange rate. I agree with the comments of the hon. Member for Birmingham, Northfield (Mr. Burden) about the rescue bid for Rover and the Phoenix consortium, but there is no doubt that John Towers would find it far easier to make a success of the company if we restored a competitive exchange rate. He was reported on 12 May as saying so in very strong terms.

In the past few days, a newspaper report said: Nissan is threatening to switch production of its next Micra car away from the UK, raising the spectre of thousands more job losses in the battered motor industry. The Japanese company, like other manufacturers, has found its profits savaged by the high value of the pound. The most productive and efficient car plant in Europe cannot return a profit on low-margin smaller cars because it is impossible to outweigh the uncompetitive exchange rate through productivity. We live in a competitive environment, where every other country in the world is also doing its best to achieve maximum productivity.

Nick Reilly, the chairman and managing director of Vauxhall Motors and head of the CBI's economic affairs committee, has blamed the pound's strength for the troubles experienced by many companies. On 26 April, the Press Association reported him as saying: We think there are sure signs of manufacturing slipping back into a recession. In my part of the world, Toshiba has been questioned about rumours that it may halt production at its television factory in Plymouth. A spokesman said that there were no current plans to do so, but added that sterling's continued strength was almost forcing us to close it. These are terrible times for some of the most efficient businesses in the world. They have a lot of money to invest as long as they believe that there is chance of operating competitively in the reasonably near future. That is where there is a huge question mark over the policies of those on the Labour and Conservative Front Benches. The Conservatives want to postpone any decision on euro entry for five years. I do not know what "Save the Pound" means if they want to save it for five years. Either they want to save the pound or they want to think about it in five years. The Conservatives are guilty of exaggerating their position. They want to set aside any question of tackling the problems for five years, but the Government are also refusing to engage in the debate or take any material action.

The Conservative Front Bench position is somewhat confused. On 9 May, the shadow Chancellor was reported as saying: We have to get used to the fact that a strong currency is not a bad thing. It is a reflection of a strong economy. The former Chancellor, the right hon. and learned Member for Rushcliffe, clearly does not agree with that and it is questionable whether his Front-Bench colleagues do either. The hon. Member for South-West Hertfordshire (Mr. Page) has said: Matters have been made worse by the weak euro vis-a-vis the pound. It does not sound as though he thinks that it is a success story. It sounds as though he would like something done about it. He went on to say: The latter's strength against the euro and the far eastern currencies— interestingly acknowledging that there is a wider issue— will make it that much more difficult for our shipbuilding companies to obtain orders.—[Official Report, Westminster Hall, 4 April 2000; Vol. 347, c. 169WH.] Even the shadow Secretary of State for Trade and Industry asked in January what representations the Secretary of State makes on behalf of key industries and manufacturers in relation to the high pound. It is just as well that there is some confusion on the Conservative Front Bench, because the shadow Chancellor is wrong. Almost nobody in business or in the wider economy believes that we should regard the high pound as a mark of our success.

The Government are little better. They have acknowledged the problem since 1997. In July 1997, the then Economic Secretary to the Treasury, the right hon. Member for Airdrie and Shotts (Mrs. Liddell), said: The Government share the anxieties about the exchange rate, but there are no short-term fixes. In March this year, the Prime Minister said: I too know the real problems the level of the pound causes. In May, we were told in the Financial Times: The Chancellor understood the "great difficulties" this was causing, particularly for manufacturing, but ruled out a "short-term fix". I understand that, tonight, the Prime Minister will again acknowledge the problems of a high pound, but he has come up with a new argument. Now he says that doing anything about it would risk a return to instability in the economy. The irony of that is that sterling exchange rates is the one area in which there is instability in the economy. That instability is the cause of the problem.

I also notice that the Secretary of State for Trade and Industry said that he understood the difficulties and confirmed that the exchange rate must be part of the tests for the conditions of entry. That is a breakthrough, because we have never been able to get such a statement from the Chancellor of the Exchequer. It is good to know that the Government believe that, if we join the single currency, it should be at a competitive rate. The question is what they will do about it, and that is the issue that Liberal Democrats have sought to address.

Britain could have committed to joining the euro in 1997. When the first wave of members was announced, the conditions, including the exchange rate—then at DM2.78—were good for Britain. However, that opportunity has been missed. Now, we need an active strategy for reaching the point at which we could reasonably put the issue to the British electorate on terms that would allow British manufacturing industry to survive. Sterling is some 13 per cent. above the DM2.95 central rate when we were in the European monetary system, 21 per cent. above the rate at which the markets thought we were over-valued when we were ejected from the EMS, and some 52 per cent. above the rate of DM2.21 when the pound sank to its low in November 1995.

Things could be done to solve the problem. The most immediate action that the Government could take, without needing any change of policy and in line with the principles they have already announced, would be to say that they are actively looking to work towards the exchange rate conditions in which Britain could seek to join. They say that they want to allow the British people to make the decision and that they want to allow manufacturing to survive. The simple announcement of active progress and an indication of the exchange rate level they sought would in itself move sentiment in the market. We have evidence for that, because it happened in every single European country as they moved towards membership of the single currency. It worked for them, and it could work for us.

Opportunities also exist for active intervention in the market, which would not risk losses but make a profit for the Government. The euro will not continue to fall indefinitely and the pound will not continue to go up indefinitely—if it does, we can write off manufacturing and much of the Government's economic policy—so if the Government chose to invest in European securities, they could buy them more cheaply. They would also make a profit in the long run and, in the mean time, that investment would help liquidity in the market.

We set up a team of top economists to look at the issue. They did so, not as Liberal Democrats, but as people who share our concern about the problem. It should not be us who are doing that, because the Government should take a lead on the issue. In the mean time, as a result of the Government's sympathy with inaction, some 240,000 people have lost their jobs in manufacturing since the general election.

6.3 pm

Mrs. Claire Curtis-Thomas (Crosby)

The nature of manufacturing in the UK is changing and, as a responsible Government, we need to change and to develop our policies if we are to maximise the benefit of our manufacturing sector. This Government work to encourage successful business start-ups and to increase the capacity of business, including small and medium enterprises. I shall talk about that sector, including the sharing of good practice, skill shortages, funding, regulation, and working in partnership with people and organisations in our communities.

Enterprise and innovation are critical factors in the creation and growth of successful businesses. The pace of innovation in our knowledge-driven economy means that competitive advantage has to be refreshed constantly by businesses of all sizes across the range of business sectors. The DTI is working with intermediary organisations to bring about a step change in the level of enterprise and innovation in the UK economy, throughout the regions. It offers a range of targeted expenditure programmes to address cultural barriers to entrepreneurship and innovation, to provide support for start-ups and manufacturing SMEs, to promote the skills agenda and business best practice, and to facilitate a more effective exploitation of the knowledge base.

In December 1998, the Department published a much welcomed White Paper, "Our Competitive Future: Building the Knowledge Driven Economy", which set out a clear agenda for strengthening the capabilities of the UK economy to meet the challenges of the 21st century. As a consequence, the Chancellor announced in the Budget last year the Government's intention to establish a new body, the Small Business Service, which would be especially designed to meet the needs of the smaller business.

Last week, I met David Irwin, the new chief executive of the Small Business Service, and he confirmed that its objective was to act as a strong voice for small business at the heart of government and to improve the quality and coherence of delivery of Government support programmes for small businesses, ensuring that their needs are addressed. He also said that the issues raised by the business community included skill shortages, funding, sharing good practice and, to a lesser extent, regulation.

The Government made a commitment in their manifesto to support small businesses by several innovative means, including statutory interest on late payment of debts. That commitment was met when the Late Payment of Commercial Debts (Interest) Act 1998 came into force on 1 November 1998. Several targets in the public service agreement relate to the objective of promoting enterprise and increased productivity. In particular, the DTI is working towards securing an increase in the number of high-growth business start-ups; increasing the productivity and profitability of SMEs assisted by business link partnerships; showing year-by-year improvements in the quality of services under the Business Link brand; increasing to 1 million the number of UK SMEs wired up to the digital marketplace by 2002; and increasing by 50 per cent. the 1997–98 number of companies spun out by universities by 2001–02.

It is crucial to provide locally delivered business support for SMEs. National, regional and sectoral strategies for competitiveness and economic development have to be backed by first-class business support services. Most of us are aware that Business Link is a national network of 85 local partnerships, which provides a simple route to information and advice for small businesses through a single point of access. Business link partnerships work closely with private sector sources of advice and services to improve the overall quality of help available to SMEs and to increase the market demand for such services. The network in England is now complete, with all businesses having access to the services provided.

In October 1997, the then Minister with responsibility for small firms, my hon. Friend the Member for Hornsey and Wood Green (Mrs. Roche), launched "Enhanced Business Links—A Vision for the 21st Century", which focused on quality, customer service and continuous improvement and excellence. The document outlined 18 action points, 14 of which have now been completed, including the launch and delivery of the enterprise zone, which is a significant and important regional initiative.

The Business Link vision was refreshed the year before last at the Business Link national conference, which identified six new challenges for implementation last year and this. Those challenges included building up, within three years, a high quality, customised advice service throughout England to support 10,000 high-growth start-ups a year; forging new partnerships, especially with the regional development agencies; using innovation and advanced techniques to satisfy rising customer expectations; preparing business links and SMEs for the opportunities of electronic commerce; getting to grips with brand managements; and recognising that continuous improvement must be a fact of everyday life. I would welcome a comment from my hon. Friend the Minister on how the Government have responded to those important challenges.

Business finance is essential to the development and promotion of small manufacturing enterprises. In 1998, a very good innovation was launched that recognised the tendency for firms still to rely on debt finance when equity might better meet their needs. However, equity in smaller amounts could often be hard to source. That was a complaint that those of us who visited small companies often encountered. As a consequence, a new enterprise fund was established to provide flexible financial support for SMEs with growth potential. The enterprise fund is intended to stimulate and support partnerships with the private sector to improve the availability of venture capital for early-stage, high-technology firms, and I am pleased to note that the venture capital available in the UK is at record levels. The fund will also deliver a more cost-effective small firms loan guarantee; invigorate local and regional provision of equity in smaller amounts to growing businesses; and allow finance providers to bid for support for new products that expand their activities into untried areas. This fund is worth about £160 million over three years from 1999 to 2002.

There is an increasing premium from successful development and commercial exploitation of new technology. Thus, research and development play a vital role in enhancing company performance and promoting economic growth. I am aware that the Department of Trade and Industry is continuing to work closely with the Treasury and the Inland Revenue in examining new incentives to encourage United Kingdom SMEs to invest in R & D. I welcome especially the tax break that was announced, not only in this year's Budget but in last year's.

Good engineering is based on good research, and research investment fell to an all-time low during the previous Administration. The Labour Government have met commitments with funds. During 1998–99, the comprehensive spending review announced a boost to investment in the science and engineering base of £1.4 billion over three years. Real-term increases in funding have gone to the Royal Society, the Royal Academy of Engineering and the six research councils. The joint infrastructure fund was created in partnership with the Wellcome Trust to address infrastructure problems in universities. These problems had been increasing over 20 years.

The continuation of the joint research initiative was secured. Last but not least, funding was announced for a private finance initiative to provide super-computing services for academic research.

I have discussed a range of services and support for the development of manufacturing in the United Kingdom. There is a passionate commitment to enable British companies to respond to a rapidly changing environment. Issues of funding and business development support have been tackled, but I remain deeply concerned that we are continuing to fail to attract sufficient individuals into manufacturing to meet sector demands. There are requirements not only for professional engineers but for technicians and skilled and semi-skilled workers.

The previous Administration introduced the Deregulation and Contracting Out Bill in 1994. It is now acknowledged that the measure was so restrictive that only 42 orders have been exercised since the Bill's enactment. That has saved British industry about £40 million. The measure clearly failed in its objective to cut red tape. It was with great pleasure that I noted in the Queen's Speech this year that a better deregulation Bill would be introduced. I welcome the measure, which will enable better regulation to be delivered to British business. I am grateful for the opportunity to contribute to the debate. I have no hesitation in supporting the amendment.

6.13 pm

Sir David Madel (South-West Bedfordshire)

I welcome this short debate, which is taking place at an appropriate time. Some sections of manufacturing industry are doing all right and others are not. As has been said, many companies are struggling with the high value of the pound. As always in British industry, the picture is somewhat uneven. As the debate is short, I shall raise only one local and one national issue.

In the Luton and south-Bedfordshire area, we are extremely pleased that Vauxhall will invest £162 million into my constituency and next-door constituencies. Nothing could be a better boost than the 500 new jobs that will be created as a result of the Vauxhall-Renault van deal. As one of the local Members in the area, it goes without saying—I shall say it again, anyway—that I appeal to Vauxhall to give priority, in placing people in the new jobs, to unemployed truck workers, who for years kept General Motors going by working with great skill and devotion in the now, alas, shut truck plant in Dunstable.

I am grateful to the hon. Member for Ellesmere Port and Neston (Mr. Miller) for nodding in agreement. I think that he will agree with me also that GM remained in this country, when there was a great deal of trouble at Ellesmere Port and at Luton, because Dunstable was trouble-free in many ways. Whatever else GM thought about the United Kingdom, it knew that trucks were being turned out at Dunstable and that the work undertaken there reflected the highest skills.

I do not want the Government to sit back and luxuriate against that background. Instead, I want them to do two things that will help us locally. First, I hope that the new investment will result in the creation of new supplier companies to the car industry locally. Some of these firms will be small, and I ask the Government to re-examine restrictions and red tape that hamper small businesses. I want new and small supplier companies to get started in the area that I represent as a result of Vauxhall's investment. Nothing hampers a small company from growing into a larger one more than some of the regulations and red tape that they now have to endure.

Secondly, Dunstable has firms that supply cars to Vauxhall and to the car industry in the midlands and the north-east. We shall keep the jobs that they provide only if those firms can move their goods quickly out of Dunstable into the midlands and north-east, but the local road network is becoming steadily worse. I want the Department of Trade and Industry to elbow its way into the debate on where new roads should be built for industrial purposes. There is an unanswerable case on behalf of Dunstable for a new A5 bypass. That would make it easier for supplier firms in my constituency to move their goods quickly in a highly competitive industrial market, which will become even more competitive as time passes.

My criticism of the Government's industrial policy is that sometimes the DTI leaves undone those things that it should do and engages in things that it should not do. Left undone is the provision of certain essential strategic industrial roads.

A national issue is that we do not take enough pride in what our engineers have produced. Figures from Japanese industry show that more than half of all new patents taken out anywhere in the world are based on ideas that have originated from the UK. We should take immense pride in what we have done. However, we cannot sit back and think that all is well on the basis of what Japanese industry has said. We have worsening shortage problems. We have a shortage of qualified engineers in systems engineering, aerospace engineering, automotive design engineering and electronic and software engineering. There is the perennial shortage of technicians. Alas, the number of students undertaking teacher training in science, technology and mathematics is falling.

We should think carefully about the learning and skills councils that the Government are setting up. The evidence that the Engineering Employers Federation has given is as follows: Many employers are afraid that the proposed Learning Skills Councils will become supplier driven instead of demand led; that the employer work-based route will become even more subservient to the academic/qualification pathway than already exists. In tackling the problem of skill shortages, I ask the Government to reflect on the Learning and Skills Bill.

Dot.com technologies, excellent and growing as they are, are not enough to sustain virtually full employment. They cannot do it all on their own. I am all for young people mastering the internet and technology, as so many of them do, but I wish that more of them would master one major European language as well. The languages that young people learn at school and university will do so much in future to help industry export to the critical European market.

I end my speech with one question for the Government. The latest inflation report overview from the Bank of England states: The paramount objective of UK monetary policy is to meet the 2½% inflation target. Is that enough after three years? Should not the paramount objective of UK monetary policy now be a strengthened industrial base? The Bank of England statement is all right as far as it goes, but in the year 2000 it is not wide enough, and it is not doing enough to create more jobs in industry, to create more investment in industry and to make the UK once again a powerful industrial base.

6.20 pm

Mr. Jim Cunningham (Coventry, South)

I begin by noting that two pieces of good news have emerged recently. First, my right hon. Friend the Secretary of State for Defence made an announcement today that will reassure many people in the aircraft industry around the country. Many of my constituents work at the Rolls Royce plant in Coventry, and others work in the supply side of the industry. My right hon. Friend's announcement will be very important for them.

Yesterday's announcement by Marconi is the other piece of good news, especially for Coventry which, like other cities, suffered from the recessions experienced during the years of the previous Government. However, the Marconi announcement owed a lot to the endeavours of the local authority—the leader of the council went so far as to go to America to conduct negotiations. Marconi takes an interest in the education system in Coventry and, as a result, the firm knows that the engineers that it will need in the future will be produced. The firm also contributes to social programmes, and Coventry has benefited from that too.

I was a little alarmed by an earlier intervention about Massey Ferguson, and it would be remiss of me not to mention it. Although we must not be too alarmist about the matter, it is true that Massey Ferguson depends on exports and that those exports are affected by the strength of the pound. There is no doubt that the strength of the pound is important, but it should not be assumed that Massey Ferguson will pull out of Coventry. The company's labour force deserves a tribute: over the years, many jobs have been lost, but the workers who have remained have increased their productivity and have accommodated changes in management structures and techniques.

I hope that the Government will take note of my remarks with regard to Massey Ferguson, and also accept that the strength of the pound was a major factor—if not the decisive one—in what happened recently with Rover. I am a member of the Select Committee on Trade and Industry and we heard much evidence to that effect.

I have contact with businesses small and large, and there is no denying that the strength of the pound is a problem. The Government must think seriously about it, although I note that the shadow Chancellor, the right hon. Member for Kensington and Chelsea (Mr. Portillo), has said that the strength of the pound demonstrates that the economy is very healthy. That may be true, but we must not allow it to destroy the economy. I am not an economist, but my constituents are worried about these matters, and I hope that my right hon. Friend the Secretary of State will consider them.

The hon. Member for Tiverton and Honiton (Mrs. Browning) opened the debate by suggesting that, because members of the Government Front Bench have no experience of business, that somehow disqualifies them from being members of the Government, or that they are incompetent. However, I remind the hon. Lady that one does not have to be able to drive a car to understand traffic regulations or the rules of the road. I think that the hon. Lady should think seriously about that.

Earlier, the hon. Member for Tiverton and Honiton spoke about the negotiations that my right hon. Friend the Secretary of State had conducted, and she acknowledged that over the years I had gained some experience of industrial relations. I can tell her that negotiators are only as good as the information that they get from each other. They also have to rely on the integrity of their opponents.

If there is a loss of trust, negotiations are impossible and no agreement can be reached. That is an elementary truth but, in all negotiations, circumstances can change from time to time. In negotiations about job numbers, for instance, no employer will say that any job will last for ever, and a similar approach applies to all negotiations, including those between companies.

All the evidence gathered by the Select Committee made it clear that my right hon. Friend the Secretary of State did not know what BMW had in mind for Rover. People have said that he should have known, but it must be remembered that the trade unions were caught off balance too. However, what is important is that Rover starts to go from strength to strength. We must stop talking down the company's prospects, and start giving all the support that we can to the new company that has taken over the business.

Mr. Bercow

I acknowledge the hon. Gentleman's industrial experience, but does he accept that the Government continually put out to consultation proposals that flow from the European Union, yet allow small businesses only six weeks to offer a response? Is not that patently inadequate?

Mr. Cunningham

I am not sure that I agree with the hon. Gentleman, who has no industrial experience and who cannot know anything about what happens in negotiations. He cannot know either how long it takes for small businesses to respond adequately to consultation. In short, I doubt whether the hon. Gentleman really knows what he is talking about.

The Opposition have spoken about a burden of £10 billion that has been imposed on business as a result of regulation. However, when it is broken down, that total covers the costs incurred when employees take time off for hospital appointments, for example, or for holidays. Those costs represent part of the normal overheads of business.

The Opposition must get their act together if they want to move into the enterprise culture. When it comes to trade and industry, the Government have no need to take any lessons from Opposition Members who have no great experience in such matters. They have not run much in the way of business, and so cannot be too critical of other people.

I know that some of my colleagues have waited two or three hours to contribute to the debate, so I shall end by urging the Government to consider the effect that the strong pound is having on this country's manufacturing base. That effect is especially evident in the west midlands and Coventry.

6.28 pm

Mr. Nicholas Winterton (Macclesfield)

I start by expressing my long-held view that manufacturing industry is the only sustainable, non-inflationary source of economic growth. Governments or political parties neglect or ignore that fact at their peril.

Most of the Macclesfield borough is in my constituency, and a study published over the weekend showed that a higher proportion of the major businesses there make a profit than in any other town or city in the northern half of the United Kingdom. The tables in the report, which was compiled by the business information service Dun and Bradstreet, are based on the country's 50,000 largest businesses, and cover 162 towns and cities across Britain.

I am delighted that Macclesfield should be found to be the most successful northern town, and that it came 12th in the table of the top 20 towns in the United Kingdom. However, although large businesses such as Astra Zeneca and British Aerospace Systems Regional Aircraft plc contribute to that success, there are many small and medium-sized businesses in the area. They include Spectus plc, Gradus Ltd., Rosslab Ltd., County Labels Ltd., Whitaker Technical Plastics Ltd., Statiflo Ltd., Flock Print Ltd. and Henry and Leigh Slater Ltd. They are some of the range of businesses that contribute to the success of the area that I represent. I am very proud of their achievements too.

In July, I will have the important and pleasant task of presenting an Investor in People award to an excellent company called Microshape, which has been based in my Macclesfield constituency since 1993. Microshape is one such success story, having brilliantly bridged the yawning gap between innovation and marketing. I t is a specialist extrusion tooling manufacturer—of PVC windows and doors—for the plastics industry. It is the United Kingdom's leading supplier of extrusion tooling. The company designs, manufactures and commissions extrusion tools. There are very few independent extrusion toolmakers, as the hon. Member for Dudley, South (Mr. Pearson) knows well, so Microshape has a virtual niche market. The majority of its competitors are in Germany and Austria.

In the past year, Microshape has invested £500,000 on improved machinery to automate the manufacturing process. As a result of its growth, the company is due to relocate to new purpose-built premises in Macclesfield. That represents an opportunity for a company to create a world-class environment, for the benefit of employees and customers alike. I believe that the future of Microshape now looks brighter than at any time in the past.

I say that not to give the Government a pat on the back. Macclesfield, after all, is represented by a Conservative and independent Member of Parliament and Conservatives have had overall control of the council, even through the Conservative party's bleak times.

There were certainly heavy job losses in manufacturing under the previous Government, from 1979 to 1997. However, in May 1997, despite sometimes avoiding admitting it, the new Government inherited low inflation and the lowest unemployment rate of the major European Union states. I say that not just as a Conservative—it was said by someone who was not a particular supporter of the Conservative party. Adair Turner, the former head of the Confederation of British Industry, said in September 1999: Like the US, but unlike some other European countries, we now achieve low unemployment with minimal inflationary pressure…this reflects the impact of the profound Labour market liberalisation introduced by the previous Government in the eighties and early nineties. We can bandy statistics across the Chamber, but in the previous Parliament, from 1992 to 1997, the number of people employed in manufacturing rose by some 70,000. Under Labour, the net loss of manufacturing jobs stands, after three years, at 206,000.

This country has had a long history and a proud tradition of inventiveness and enterprise. To the present day, we enjoy a wealth of innovation and talent. Although the UK has the innovation and enterprise required to stimulate and sustain economic growth, a key link is broken then with the further development and marketing stages that I believe are vital for a manufacturing success story. After all, the second report of the Select Committee on Science and Technology states: The major part of university and public sector activity is research, directed at acquiring knowledge. The major part of industrial activity is development, directed at achieving what the market wants. That is where I believe that we fall down and squander our talents and opportunities. The UK's science base is good; it produces more innovative ideas than are taken up commercially. The UK is strong in scientific invention, but weak at applying and exploiting inventions and enterprise in a marketable form.

I turn now to the clothing and textiles industry, which I know well. We appear to have a death wish as far as manufacturing is concerned. Have successive Governments ever been able to understand the worn-out cliché "being competitive"? With the retail chain stores looking for price reductions year on year, and taking into consideration the balance sheets of all the suppliers to the retail outlets, it is my view that the writing has been on the wall for the past 18 or 20 years.

In Germany, firms can borrow money at one third of the price that applies in the United Kingdom, and they have three times as long to pay it back. In addition, retail stores in this country are looking for a 320 per cent. mark up on the goods that they purchase from their suppliers.

The continuous drain on retail companies competing against each other at lower and lower prices has virtually destroyed the clothing and textiles industry in the UK.

Mr. John Cryer (Hornchurch)

Will the hon. Gentleman give way?

Mr. Winterton

I am afraid not, because I do not have the time.

I may be unpopular with my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) when I say that the demands of the City for companies to produce dividends that are impossible to achieve is a contributory factor.

As with all of manufacturing, matters have not always been helped by the Government. A lack of joined-up government between the Department of Trade and Industry and the Ministry of Defence has let down textile producers in relation to Her Majesty's Government in sourcing goods.

Waterproof jackets costing a total of £1 million have been purchased for our Navy from Germany. Why? There are good suppliers in this country. A further £6.5 million worth of combat kit for the Army was also purchased in Germany, putting 100 jobs at risk in Cumbernauld. Some 120,000 camouflage jackets and trousers were purchased from Belgium. Why, when we have super, excellent manufacturers in this country? Army boots were ordered from Brazil, forcing the closure of the last footwear factory in Wales, with the loss of 65 jobs. The Government are—if I may be excused for using this phrase—putting the boot into our textiles industry.

I could also refer to the climate change levy, which will add tremendous costs to industry. It seems, from time to time, that the Government make it harder for industry to be competitive. The Engineering Employers Federation is concerned that there are many companies outside the potential scope for energy efficiency agreements, whose extra costs due to the levy will far exceed their small rebate on national insurance.

The EEF believes that extending negotiated agreements, to which I hope that the Minister will refer, is much more likely to secure a reduction in carbon dioxide emissions than leaving companies to respond to a tax price signal.

My interest in manufacturing is long established. I have, in my party, been one of the very few people who has stood up for this vital sector—

Mr. Deputy Speaker

Order. I call Mr. Ottaway.

6.38 pm

Mr. Richard Ottaway (Croydon, South)

Time is short, so I shall not dwell too long on the speeches, other than to say that my hon. Friend the Member for Macclesfield (Mr. Winterton) has demonstrated how well Macclesfield is served by its Conservative and independent Member of Parliament.

The opening speeches in the debate could not have provided a sharper contrast. My hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) showed, with flair and imagination, why Britain has slipped in the international competitiveness league, to such an extent that Government supporters actually asked her what they should be doing. What a contrast that was with the Secretary of State for Trade and Industry. He repeated endlessly that he would take no lectures from anybody, and seemed proud of the extra burden of regulation that he has imposed on Britain's industry. At least he had the decency to admit that he had read our "Commonsense Revolution".

I should like to dwell on the speech of the hon. Member for Birmingham, Northfield (Mr. Burden), who unfortunately is not here. I did not agree much with what he said, apart from the compliments that he paid to my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). I see that the hon. Gentleman is coming into the Chamber. Let me say to him that despite not agreeing with much of what he said, we respect the sincerity with which he made his speech and his commitment to his constituency.

The hon. Member for Crosby (Mrs. Curtis-Thomas) was right to emphasise the support for small business—in particular, the enterprise zones and business links. I hope that she recalls that they were both Conservative ideas.

My hon. Friend the Member for South-West Bedfordshire (Sir D. Madel) emphasised the importance of transport to the economy.

The charge against the present Government is that during their three years in office they have failed British industry, in particular manufacturing, and much of the blame must lie with the DTI and the Treasury. In 1997 Labour's manifesto said: we will…promote dynamic and competitive business and industry at home and abroad. It is our case that they have not only failed to do so, but have made matters worse.

My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), in a telling speech, commented on the fact that the Government had inherited a golden economic legacy of sustainable growth, low inflation and falling unemployment. Manufacturing industry was prospering after years of decline. Consecutive Conservative Governments had provided a competitive environment for UK manufacturers through measures such as trade union reform, low taxation and light regulation.

Since then Labour has slowly squandered its legacy. Business has become disillusioned. The other day the director general of the British Chambers of Commerce said: The rhetoric is good, but the Government seems to be unaware that its actions seem to be working against creating a better climate for business. We have a Government who are clearly not at ease with themselves. They talk the language of a new economy, but their instincts lie in the other direction. A commentator recently likened them to religious converts who sang the hymns but did not know what the words meant. They talk right, but they act left. They do their best to obscure the truth. The red book is indecipherable. Budget commentators refuse to be drawn into instant comment so that they can work out what the Chancellor has said.

But as the mirrors are put back into storage, as the smoke drifts away, the true picture begins to emerge. Yes, they have cut the headline rate of corporation tax to 30 per cent. Yes, they have cut it to 20 per cent. for small businesses. But it is the usual story: they are the headlines; the underlying truth is very different.

Rover is still in difficulties. Car production at Dagenham is ending. Component industries are under threat. In my Croydon constituency yesterday Avon, the tyre maker, announced 150 redundancies on the back of cancelled contracts from Rover and Ford. Strong communities face bleak futures.

Over the last three years more than 200,000 jobs have been lost in British manufacturing. It is struggling. Exporters are hit. Investment is threatened. Profit margins are shrinking. Whatever happened to that election pledge to promote competitive business? Their attack on industry has been savage.

Company pension funds have been hit, with firms such as Tesco having to go to their employees for bigger contributions. The Government changed the system for advance payment of corporation tax, a measure costing billions. Road fuel duties are hitting profits. So are stamp duty rises. The windfall tax on privatised utilities was mean and vindictive. The climate change levy will—another point made by my hon. Friend the Member for Macclesfield—impose a huge increase in taxation on manufacturing. The tax will harm energy-intensive businesses, principally manufacturers. Research indicates that it will destroy 150,000 jobs over the next decade.

Just when Britain is leading the high-tech race to make industry more competitive the Government introduce IR35, a hard-hitting tax on the self-employed, driving our best people overseas. IT consultant Steven Weaver writes: I am ashamed to say that I voted for this business hostile Government…I have no wish to remain in a country that punishes enterprise instead of encouraging it. My company turned down six months' further work in the UK implementing e-commerce systems for our major telecommunications company, entirely because of IR35. And—can you believe it, Mr. Deputy Speaker?—just as the exodus is starting, the Department for Education and Employment announces a fast-track work permit route because—surprise, surprise—it has discovered that there is a skill shortage in the IT sector.

The Budget a few weeks ago hit the aggregates and construction industry. The changes to double taxation relief will cost manufacturers and other British companies that invest abroad billions a year. They will make Britain one of the least attractive locations for international companies seeking to relocate. Is that what the Government meant when they said that they would promote…industry at home and abroad? It comes as no surprise that Sir Clive Thompson, the CBI President, has said: The Government has introduced a series of well-camouflaged taxes which has put the tax burden firmly on to business. Changes by the Chancellor since 1997 will push up business taxation by almost £5 billion a year for the first five years of the Labour Government. He made that comment before hearing the Prime Minister's speech to the CBI tonight. That comes on top of the £5 billion a year in new red tape with which businesses are having to contend.

The British Chambers of Commerce declared that Labour's honeymoon with business was over. Its chief executive said: I think business attitudes may well have reached a watershed. There is growing disillusionment with this Government's pro-business credentials. There is a feeling that they are not hearing us. They listen but do not hear…It is becoming incredibly difficult for business to match the rhetoric to the reality. It is no wonder that Lord Haskins, Labour's own business guru, said: entrepreneurs are being distracted from running and growing their businesses by the cumulative burden of taxation and regulation. For the last seven years we have had a prolonged period of economic stability, with steady growth and low inflation. Over the last three years the economy has continued to perform well. That has to be welcomed on all sides of the House. But the Government should not fall into the trap of thinking that they invented economic growth. It began in 1992, and unemployment started falling in 1993. That is why in 1997 the Organisation for Economic Co-operation and Development, an organisation that Labour was keen on quoting when in opposition, said: the prospects for obtaining sustained output, growth and low inflation are the best in 30 years. That is the situation that Labour inherited.

But the House should be quite clear that below the surface the sharks are circling. The tax and regulatory burden is hurting. The problems are a symptom of the Government's failure to understand the challenges of the global economy. They are leading us in the wrong direction.

In the last Budget, the Chancellor started taking risks. Savings have collapsed. The International Monetary Fund, the Institute of Directors and the CBI have all predicted that the Chancellor's latest Budget will put further pressure on interest rates. That is bound to affect Britain's competitiveness.

To cope with this, Britain is faced with a clear choice. We can either follow the European model of higher taxation and greater regulation or head in the direction of lower taxation and a smaller regulatory burden, as found in Asia and the United States. Given the growth of global competitive pressures, the answer is—to this party at least—self-evident.

But what surprises us most is that, given our successful economy, the Government are going in the opposite direction. The tax burden has risen by 2 per cent. since 1997. Red tape is endangering our competitive position. The Government are going in the wrong direction now, as they did in the past. In opposition, they opposed every privatisation, even though they now admit that we were right. However, even in government their limited vision shows.

The lack of industrial strategy is evident. Subsidy is available for coal, but not for shipbuilding; it may be available for cars. We must have a strategy based on a proper understanding of the global economy. We need to be agile, quick on our feet and able to adapt to world conditions, as and when they develop.

Competitiveness is everything, as my right hon. Friend the Member for Henley (Mr. Heseltine) demonstrated in the last Parliament. But the Government have a problem: they are in hock to the unions and they cannot break out. In The Times last Thursday, under the headline "Unions plot to hijack Labour policy", there appeared a report that began: Britain's seven biggest trade unions have joined forces in a concerted attempt to dictate policy to Tony Blair on manufacturing industry. He who pays the piper calls the tune. The Government are stuck with it. Nothing better illustrates why they talk right, but act left.

The Government should listen to John Edmonds, the leader of the GMB. He said: Thousands of jobs are being lost every week in the very heartland areas that the Labour Party is supposed to be cultivating in the run up to the next election … Tony Blair should wake up and smell the coffee. What are they saying in Labour's heartlands—in a typical constituency, such as Sedgefield? An article about the Newton Aycliffe working men's club stated: Eddie Cadd, 61, a retired factory worker, said that new Labour's priorities since 1997 had been "all wrong…People here are worried about their jobs, about their pensions, about the things that really matter. But all he cares about— That is the Prime Minister— are things like foxhunting, devolution and abolishing the House of Lords. What difference does that make to us? Another person at the club said: All of us here are staunch Labour. But in certain areas we know the Tories were better for us than Labour are now. If we voted according to common sense, instead of sticking to our roots, maybe we would all vote Tory and that lot would never get in again. It is to the Conservative party that the nation will look for solutions. The Government are victims of their own rhetoric. They have no answers to the challenges facing the nation. They are victims of their own spin. They raised expectations to such a degree that it is impossible for them to deliver. We know that; the British people know that—the workers of Dagenham and Croydon certainly know that. The Government must live with the consequences.

6.51 pm

The Economic Secretary to the Treasury (Miss Melanie Johnson)

I was interested to hear that the Tories left us such a wonderful economic inheritance. Did they? Let us examine the appalling economic inheritance that we actually received from the previous Tory Government.

The Conservatives left Britain's record of economic stability among the worst of the G7 countries. Since 1979, Britain had suffered the two deepest and longest recessions since the war, as well as one of the largest booms. Among the G7 countries, only Canada experienced more growth instability during those 18 years than the UK under the Tories.

In the late 1980s and early 1990s, 1 million jobs were lost in manufacturing and 1 million businesses went under. A total of 2 million jobs disappeared. Interest rates were more than 10 per cent. for four years.

What golden legacy led to Black Wednesday in 1992? On that day, interest rates were 10 per cent. when we started work; 12 per cent. by 11 o'clock; and by 3 pm, they were set to be 15 per cent. That is the record of the Tory Government, who were led by the Black Wednesday horror team of the Chancellor—now Lord Lamont—and the then Chief Secretary to the Treasury, the present shadow Chancellor, none other than the right hon. Member for Kensington and Chelsea (Mr. Portillo).

Poor growth and productivity performance were—at least partly—reflected in under-investment. In every year since 1960, the UK invested a lower share of gross domestic product than the OECD average. During the last full international economic cycle from 1982 to 1993, the UK under the Tories invested a lower share of GDP than any G7 country.

The Labour Government inherited a history of large budget deficits and a steeply rising burden of public debt, while public investment had been neglected. We have no lessons to learn from the Opposition's record of failure and mismanagement—none whatever.

What have the Government done? Let us consider our record. [Interruption.] For the third year running, inflation is in line with our target and is at a historically low level. The economy is forecast to grow steadily—by between 2.75 and 3.25 per cent. this year and between 2.25 and 2.75 per cent. next year and the year after. At one time, long-term interest rates were 2 per cent. or more above those of Germany. They are now level with the German rate—showing that people have confidence in a low-inflation future for Britain. That is a platform from which businesses can plan for the longer term with greater confidence.

I pay tribute to my hon. Friend the Member for Birmingham, Northfield (Mr. Burden) for his work towards the long-term future of Longbridge. He referred to the role of the banks. I emphasise that the Bank of England is keen to ensure that its existing network of 7,000 business contacts relays regional information back to it as part of the process for setting interest rates and making other decisions.

We cut borrowing by £40 billion during our first three years in office. We are on course to meet the two strict fiscal rules—[Interruption.] In the Budget, we decided to lock in greater fiscal stability next year and the year after than we had promised in last year's Budget and in the pre-Budget Report. Because of the tough decisions we took to cut the deficit during our first two years and lower longer-term interest rates, debt interest payments—

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

Order. We cannot have these conversations between hon. Members while the Minister is speaking—[HON. MEMBERS: "Over there."] Order. I know where the noise is coming from.

Miss Johnson

Thank you, Mr. Deputy Speaker. One can but conclude that, although the Opposition did not know the answers when they were in government and clearly do not know them now, they do not want to hear about the policies that the Government are successfully pursuing.

As a result of the tough decisions we took to cut the deficit, debt interest payments will be £4 billion a year lower, so we shall be able to repay debt. Last year, we repaid £3 billion; this year, it will be £12 billion; next year, it will be £6 billion and £5 billion the year after that. That is indeed the third way in operation.

Let us consider the previous Government's record on manufacturing output and employment. Between 1979 and 1997, manufacturing employment fell by more than 2.5 million. In the early 1990s, when interest rates rose to 15 per cent. for a whole year, manufacturing output fell by more than 7 per cent; manufacturing investment fell by 28 per cent.; and more than 1 million manufacturing jobs were lost.

Since the 1997 general election, manufacturing employment has fallen by about 160,000 altogether. As my right hon. Friend the Secretary of State said in his opening remarks, we should compare that figure with the yearly reductions between 1979 and 1997—140,000 manufacturing jobs were lost for every year of Tory government.

Mr. Bercow

Will the Minister give way?

Miss Johnson

I am sorry, I cannot give way. There is a limit on speeches and many Government Back-Benchers who wanted to contribute to the debate have unfortunately been unable to do so.

From May 1997, output rose by 16 per cent. to reach its highest ever point—in the fourth quarter of 1999. During the past three months, output rose by 1.6 per cent. The volume of manufacturing exports rose 9.5 per cent. in the year to February 2000. Productivity is increasing by about 5 per cent. per annum—the fastest rate for five years. Manufacturing investment rose 4 per cent. during the latest quarter—the last quarter of 1999.

Manufacturing employment continues to contract, but our experience matches that of the United States; roughly the same proportion of people in the US and in the UK are employed in manufacturing. I understand and sympathise with those manufacturing sectors for which the current fall in the euro is a real problem. Such a euro-sterling exchange rate cannot be justified by any view of the long-term economic fundamentals, as my right hon. Friend the Chancellor remarked last week.

However, it would be wrong and counterproductive to adopt the short-term measures proposed by some people, including some Opposition Members. That would indeed be to repeat past mistakes. Instead, we should look to the long term. We must reject a return to the short-term, quick fix that would put at risk the long-term stability that is the foundation for steady growth, investment and job creation. Mervyn King, the deputy governor of the Bank of England, said: Stability must be the watchword of policy. We have avoided recession in the economy and we now have healthy growth. That is why there are now almost 900,000 more people in work than there were in 1997 and that is why new jobs are being created in manufacturing. In the past week, the creation of 500 new jobs has been announced at Vauxhall, 150 at a new Laird plant in Wolverhampton and, as my right hon. Friend the Secretary of State for Trade and Industry remarked, 2,200 new high-quality jobs are being created by Marconi in the west midlands.

Manufacturing has responded. Productivity among electrical and optical equipment manufacturers has risen by 22 per cent. since 1997 and, in the chemical industry, it has risen by 8 per cent. British car factories are among the most productive in the world. I was saddened to hear some Members talking down our manufacturing business in general and our car production in particular.

Let us consider just one or two aspects of the car industry. I acknowledge that these are difficult times for vehicle manufacturers throughout the world, but a number of recent announcements show the strength of vehicle manufacture in the UK. Peugeot doubled its production in the UK last year; Jaguar achieved record sales and record production; Nissan announced 800 new jobs at Sunderland; and Toyoda announced 400 new jobs in Rotherham. This year, Audi announced an investment of £45 million in Cosworth engineering to expand its site in Northampton, doubling its work force to 1,500. The recent Vauxhall statement, to which the hon. Member for South-West Bedfordshire (Sir D. Madel) referred, announced £189 million of new investment that will create 500 new jobs at the Luton factory. Honda has announced £130 million of investment in Swindon to allow the production of a new model, and last month's sales figures showed that British-built cars increased their sales against the general trend.

Since 1997, more than £2.6 billion of new investment has been announced with 8,750 new jobs created. We accept that difficult decisions must be made, but that is the context in which those decisions are being made. That is the picture of the UK industry—[Interruption.]

Mr. Deputy Speaker

Order. It is not a good thing for the Chair to keep intervening, but there is too much noise in the Chamber. I appeal to hon. Members; the hon. Lady is entitled to be heard.

Miss Johnson

Thank you, Mr. Deputy Speaker. I again draw the conclusion that Conservative Members do not want to listen to the facts of this Government's economic good-news story. It is a good-news story that extends to many sectors of manufacturing despite, we acknowledge, the difficulties under which they are working.

I pay tribute to my hon. Friend the Member for Crosby (Mrs. Curtis-Thomas), because her contribution recognised the wider measures that the Government are taking for business. We have the lowest corporation tax levels ever—businesses' corporation tax bills have been cut by 25 per cent.—and we have introduced the new research and development tax credit, investment allowances, the venture capital fund and the new venture capital arrangements.

I could go on at great length. [HON. MEMBERS: "More, more!"] I would be delighted to go on at greater length, but I am afraid that Conservative Members have shown no inclination to listen as indeed they have shown no inclination, in what they have said today or done since 1997, to learn from the mistakes of the previous Administration. They have not learned from the past. Indeed, in November 1999, the then shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), predicted a sharper downturn, and said that that was not reflected in the Government's complacency at the time. That prediction, as with all the Tories' predictions, proved to be wrong.

In contrast, this Government know how to manage the economy. We are looking to the long term, delivering a platform for stability and steady growth and delivering policies for supporting manufacturing and British industry in the competitive global economy. We are optimistic that British manufacturing and British business can match the best in the world. All that would be put at risk by the Conservative party—the boom-and-bust party that pursued short-term economic policies that produced two of this country's deepest and longest recessions and destroyed millions of jobs in manufacturing.

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

Division No. 195]	[7.5 pm
AYES
Ainsworth, Peter (E Surrey)	Chapman, Sir Sydney (Chipping Barnet)
Allan, Richard
Arbuthnot, Rt Hon James	Chidgey, David
Baker, Norman	Chope, Christopher
Baldry, Tony	Clappison, James
Ballard, Jackie	Clark, Dr Michael (Rayleigh)
Beggs, Roy	Clarke, Rt Hon Kenneth (Rushcliffe)
Beith, Rt Hon A J
Bercow, John	Clifton-Brown, Geoffrey
Beresford, Sir Paul	Collins, Tim
Blunt, Crispin	Cormack, Sir Patrick
Body, Sir Richard	Cotter, Brian
Boswell, Tim	Cran, James
Bottomley, Peter (Worthing W)	Curry, Rt Hon David
Bottomley, Rt Hon Mrs Virginia	Davey, Edward (Kingston)
Brady, Graham	Davies, Quentin (Grantham)
Brake, Tom	Davis, Rt Hon David (Haltemprice)
Brand, Dr Peter	Duncan Smith, Iain
Brazier, Julian	Emery, Rt Hon Sir Peter
Breed, Colin	Evans, Nigel
Brooke, Rt Hon Peter	Faber, David
Browning, Mrs Angela	Fabricant, Michael
Bruce, Ian (S Dorset)	Fallon, Michael
Burnett, John	Fearn, Ronnie
Burns, Simon	Flight, Howard
Burstow, Paul	Forth, Rt Hon Eric
Butterfill, John	Foster, Don (Bath)
Campbell, Rt Hon Menzies (NE Fife)	Fowler, Rt Hon Sir Norman
	Fraser, Christopher
Cash, William	Gale, Roger

Garnier, Edward	Moss, Malcolm
George, Andrew (St Ives)	Nicholls, Patrick
Gibb, Nick	Norman, Archie
Gidley, Ms Sandra	Oaten, Mark
Gill, Christopher	O'Brien, Stephen (Eddisbury)
Gillan, Mrs Cheryl	Öpik, Lembit
Gorman, Mrs Teresa	Ottaway, Richard
Green, Damian	Page, Richard
Greenway, John	Paice, James
Grieve, Dominic	Paterson, Owen
Gummer, Rt Hon John	Pickles, Eric
Hammond, Philip	Randall, John
Hancock, Mike	Redwood, Rt Hon John
Harris, Dr Evan	Rendel, David
Harvey, Nick	Robathan, Andrew
Hawkins, Nick	Robertson, Laurence
Hayes, John	Ruffley, David
Heald, Oliver	Russell, Bob (Colchester)
Heath, David (Somerton & Frome)	St Aubyn, Nick
Heathcoat-Amory, Rt Hon David	Sanders, Adrian
Hogg, Rt Hon Douglas	Sayeed, Jonathan
Horam, John	Shephard, Rt Hon Mrs Gillian
Howard, Rt Hon Michael	Shepherd, Richard
Howarth, Gerald (Aldershot)	Simpson, Keith (Mid-Norfolk)
Hughes, Simon (Southwark N)	Smith, Sir Robert (W Ab'd'ns)
Jack, Rt Hon Michael	Smyth, Rev Martin (Belfast S)
Johnson Smith, Rt Hon Sir Geoffrey	Soames, Nicholas
	Spelman, Mrs Caroline
Keetch, Paul	Spring, Richard
Kennedy, Rt Hon Charles (Ross Skye & Inverness W)	Steen, Anthony
	Stunell, Andrew
Key, Robert	Swayne, Desmond
King, Rt Hon Tom (Bridgwater)	Syms, Robert
Kirkbride, Miss Julie	Tapsell, Sir Peter
Kirkwood, Archy	Taylor, Ian (Esher & Walton)
Laing, Mrs Eleanor	Taylor, John M (Solihull)
Lait, Mrs Jacqui	Taylor, Sir Teddy
Lansley, Andrew	Thomas, Simon (Ceredigion)
Leigh, Edward	Townend, John
Letwin, Oliver	Tredinnick, David
Lilley, Rt Hon Peter	Trend, Michael
Livsey, Richard	Tyler, Paul
Llwyd, Elfyn	Viggers, Peter
Loughton, Tim	Walter, Robert
Luff, Peter	Waterson, Nigel
Lyell, Rt Hon Sir Nicholas	Webb, Steve
MacGregor, Rt Hon John	Wells, Bowen
McIntosh, Miss Anne	Whitney, Sir Raymond
MacKay, Rt Hon Andrew	Widdecombe, Rt Hon Miss Ann
Maclean, Rt Hon David	Wigley, Rt Hon Dafydd
Maclennan, Rt Hon Robert	Wilkinson, John
McLoughlin, Patrick	Willetts, David
Madel, Sir David	Willis, Phil
Major, Rt Hon John	Winterton, Mrs Ann (Congleton)
Malins, Humfrey	Winterton, Nicholas (Macclesfield)
Maples, John	Yeo, Tim
Mates, Michael	Young, Rt Hon Sir George
Maude, Rt Hon Francis
Mawhinney, Rt Hon Sir Brian	Tellers for the Ayes:
May, Mrs Theresa	Mr. Stephen Day and
Moore, Michael	Mr. Peter Atkinson.
NOES
Abbott, Ms Diane	Beard, Nigel
Ainger, Nick	Beckett, Rt Hon Mrs Margaret
Ainsworth, Robert (Cov'try NE)	Bell, Martin (Talton)
Alexander, Douglas	Bell, Stuart (Middlesbrough)
Allen, Graham	Benn, Hilary (Leeds C)
Anderson, Donald (Swansea E)	Bennett, Andrew F
Anderson, Janet (Rossendale)	Benton, Joe
Armstrong, Rt Hon Ms Hilary	Bermingham, Gerald
Ashton, Joe	Best, Harold
Austin, John	Betts, Clive
Barnes, Harry	Blackman, Liz
Barron, Kevin	Blears, Ms Hazel
Bayley, Hugh	Blizzard, Bob

Blunkett, Rt Hon David	Foster, Michael Jabez (Hastings)
Boateng, Rt Hon Paul	Foster, Michael J (Worcester)
Borrow, David	Foulkes, George
Bradley, Keith (Withington)	Fyfe, Maria
Bradley, Peter (The Wrekin)	Galloway, George
Brinton, Mrs Helen	Gapes, Mike
Brown, Rt Hon Gordon (Dunfermline E)	Gardiner, Barry
	George, Bruce (Walsall S)
Browne, Desmond	Gerrard, Neil
Buck, Ms Karen	Gibson, Dr Ian
Burden, Richard	Gilroy, Mrs Linda
Burgon, Colin	Godman, Dr Norman A
Butler, Mrs Christine	Godsiff, Roger
Byers, Rt Hon Stephen	Goggins, Paul
Campbell, Mrs Anne (C'bridge)	Golding, Mrs Llin
Campbell, Ronnie (Blyth V)	Gordon, Mrs Eileen
Campbell-Savours, Dale	Griffiths, Jane (Reading E)
Cann, Jamie	Griffiths, Nigel (Edinburgh S)
Caplin, Ivor	Griffiths, Win (Bridgend)
Casale, Roger	Grocott, Bruce
Caton, Martin	Grogan, John
Cawsey, Ian	Gunnell, John
Chapman, Ben (Wirral S)	Hain, Peter
Clapham, Michael	Hall, Mike (Weaver Vale)
Clark, Rt Hon Dr David (S Shields)	Hall, Patrick (Bedford)
Clark, Paul (Gillingham)	Hanson, David
Clarke, Charles (Norwich S)	Heal, Mrs Sylvia
Clarke, Rt Hon Tom (Coatbridge)	Healey, John
Clarke, Tony (Northampton S)	Henderson, Doug (Newcastle N)
Clelland, David	Henderson, Ivan (Harwich)
Coaker, Vernon	Hepburn, Stephen
Coffey, Ms Ann	Heppell, John
Colman, Tony	Hesford, Stephen
Connarty, Michael	Hewitt, Ms Patricia
Cook, Frank (Stockton N)	Hill, Keith
Corbett, Robin	Hinchliffe, David
Corbyn, Jeremy	Hodge, Ms Margaret
Corston, Jean	Hoey, Kate
Cousins, Jim	Hoon, Rt Hon Geoffrey
Cranston, Ross	Hope, Phil
Crausby, David	Howarth, Alan (Newport E)
Cryer, Mrs Ann (Keighley)	Howarth, George (Knowsley N)
Cryer, John (Hornchurch)	Hoyle, Lindsay
Cummings, John	Hughes, Ms Beverley (Stretford)
Cunningham, Rt Hon Dr Jack (Copeland)	Hughes, Kevin (Doncaster N)
	Humble, Mrs Joan
Cunningham, Jim (Cov'try S)	Hutton, John
Curtis-Thomas, Mrs Claire	Iddon, Dr Brian
Dalyell, Tam	Illsley, Eric
Darling, Rt Hon Alistair	Jackson, Ms Glenda (Hampstead)
Darvill, Keith	Jackson, Helen (Hillsborough)
Davey, Valerie (Bristol W)	Jenkins, Brian
Davidson, Ian	Johnson, Alan (Hull W & Hessle)
Davies, Rt Hon Denzil (Llanelli)	Johnson, Miss Melanie (Welwyn Hatfield)
Davies, Geraint (Croydon C)
Dean, Mrs Janet	Jones, Rt Hon Barry (Alyn)
Denham, John	Jones, Mrs Fiona (Newark)
Dobbin, Jim	Jones, Ms Jenny (Wolverh'ton SW)
Donohoe, Brian H
Doran, Frank	Jones, Jon Owen (Cardiff C)
Dowd, Jim	Jones, Dr Lynne (Selly Oak)
Drew, David	Jones, Martyn (Clwyd S)
Dunwoody, Mrs Gwyneth	Jowell, Rt Hon Ms Tessa
Eagle, Angela (Wallasey)	Kaufman, Rt Hon Gerald
Eagle, Maria (L'pool Garston)	Keeble, Ms Sally
Edwards, Huw	Keen, Alan (Feltham & Heston)
Efford, Clive	Keen, Ann (Brentford & Isleworth)
Ellman, Mrs Louise	Kelly, Ms Ruth
Ennis, Jeff	Kemp, Fraser
Etherington, Bill	Kennedy, Jane (Wavertree)
Field, Rt Hon Frank	Khabra, Piara S
Fitzpatrick, Jim	Kidney, David
Fitzsimons, Mrs Lorna	Kilfoyle, Peter
Flint, Caroline	King, Andy (Rugby & Kenilworth)
Flynn, Paul	King, Ms Oona (Bethnal Green)
Foster, Rt Hon Derek	Kumar, Dr Ashok

Ladyman, Dr Stephen	Murphy, Rt Hon Paul (Torfaen)
Lawrence, Mrs Jackie	Naysmith, Dr Doug
Laxton, Bob	Norris, Dan
Lepper, David	O'Brien, Bill (Normanton)
Leslie, Christopher	O'Brien, Mike (N Warks)
Lewis, Ivan (Bury S)	Olner, Bill
Lewis, Terry (Worsley)	Organ, Mrs Diana
Liddell, Rt Hon Mrs Helen	Osborne, Ms Sandra
Linton, Martin	Palmer, Dr Nick
Lloyd, Tony (Manchester C)	Pearson, Ian
Lock, David	Pendry, Tom
Love, Andrew	Perham, Ms Linda
McAvoy, Thomas	Pickthall, Colin
McCabe, Steve	Pike, Peter L
McCafferty, Ms Chris	Plaskitt, James
McDonagh, Siobhain	Pollard, Kerry
Macdonald, Calum	Pond, Chris
McDonnell, John	Pound, Stephen
McFall, John	Prentice, Ms Bridget (Lewisham E)
McGuire, Mrs Anne	Prentice, Gordon (Pendle)
McIsaac, Shona	Prescott, Rt Hon John
McKenna, Mrs Rosemary	Primarolo, Dawn
Mackinlay, Andrew	Prosser, Gwyn
McNulty, Tony	Purchase, Ken
MacShane, Denis	Quin, Rt Hon Ms Joyce
Mactaggart, Fiona	Quinn, Lawrie
McWilliam, John	Radice, Rt Hon Giles
Mahon, Mrs Alice	Rapson, Syd
Mallaber, Judy	Raynsford, Nick
Marsden, Gordon (Blackpool S)	Reed, Andrew (Loughborough)
Marsden, Paul (Shrewsbury)	Robinson, Geoffrey (Cov'try NW)
Marshall, Jim (Leicester S)	Roche, Mrs Barbara
Martlew, Eric	Rooker, Rt Hon Jeff
Maxton, John	Rooney, Terry
Meacher, Rt Hon Michael	Ross, Ernie (Dundee W)
Meale, Alan	Rowlands, Ted
Merron, Gillian	Roy, Frank
Michael, Rt Hon Alun	Ruane, Chris
Michie, Bill (Shef'ld Heeley)	Ruddock, Joan
Milburn, Rt Hon Alan	Russell, Ms Christine (Chester)
Miller, Andrew	Ryan, Ms Joan
Mitchell, Austin	Sarwar, Mohammad
Moffatt, Laura	Savidge, Malcolm
Moonie, Dr Lewis	Sawford, Phil
Moran, Ms Margaret	Sedgemore, Brian
Morgan, Ms Julie (Cardiff N)	Shaw, Jonathan
Morley, Elliot	Sheerman, Barry
Morris, Rt Hon Ms Estelle (B'ham Yardley)	Shipley, Ms Debra
	Short, Rt Hon Clare
Morris, Rt Hon Sir John (Aberavon)	Simpson, Alan (Nottingham S)
	Singh, Marsha
Mountford, Kali	Skinner, Dennis
Mowlam, Rt Hon Marjorie	Smith, Rt Hon Andrew (Oxford E)
Mudie, George	Smith, Angela (Basildon)
Mullin, Chris	Smith, Rt Hon Chris (Islington S)
Murphy, Denis (Wansbeck)

Smith, Miss Geraldine (Morecambe & Lunesdale)	Turner, Dennis (Wolverh'ton SE)
	Turner, Dr Desmond (Kemptown)
Smith, Jacqui (Redditch)	Turner, Dr George (NW Norfolk)
Smith, John (Glamorgan)	Turner, Neil (Wigan)
Smith, Llew (Blaenau Gwent)	Twigg, Derek (Halton)
Southworth, Ms Helen	Twigg, Stephen (Enfield)
Squire, Ms Rachel	Vis, Dr Rudi
Starkey, Dr Phyllis	Ward, Ms Claire
Steinberg, Gerry	Wareing, Robert N
Stevenson, George	Watts, David
Stewart, David (Inverness E)	White, Brian
Stinchcombe, Paul	Whitehead, Dr Alan
Stoate, Dr Howard	Wicks, Malcolm
Strang, Rt Hon Dr Gavin	Williams, Rt Hon Alan (Swansea W)
Straw, Rt Hon Jack
Stringer, Graham	Williams, Alan W (E Carmarthen)
Stuart, Ms Gisela	Williams, Mrs Betty (Conwy)
Sutcliffe, Gerry	Wills, Michael
Taylor, Rt Hon Mrs Ann (Dewsbury)	Winnick, David
	Winterton, Ms Rosie (Doncaster C)
Taylor, Ms Dari (Stockton S)	Wood, Mike
Temple-Morris, Peter	Woolas, Phil
Thomas, Gareth (Clwyd W)	Worthington, Tony
Thomas, Gareth R (Harrow W)	Wray, James
Timms, Stephen	Wright, Anthony D (Gt Yarmouth)
Tipping, Paddy	Wright, Dr Tony (Cannock)
Todd, Mark	Wyatt, Derek
Touhig, Don
Trickett, Jon	Tellers for the Noes:
Truswell, Paul	Mr. David Jamieson and
	Mr. Greg Pope.

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 recognises that industry does not want a return of the boom and bust policies of the previous Government, with interest rates of 15 per cent, inflation above 10 per cent and soaring budget deficits; welcomes the Government's decisive action in taking politics out of interest rate decisions; notes that employment is currently 880,000 higher than it was when the Government came into office, and that long-term interest rates over the past year have been at their lowest for 35 years; welcomes the measures that the Government has taken to encourage enterprise, investment and innovation which particularly help manufacturing businesses; welcomes the Government's view that where firms are in difficulty the Government has a role in helping people through change as opposed to the previous Government's laissez-faire approach; and condemns the Opposition for its record in government, when manufacturing employment declined by 2¾ million.