HC Deb 06 December 2001 vol 376 cc456-8
9. Paul Holmes (Chesterfield)

What representations he has received on the change in output in manufacturing industry over the last year. [18692]

11. Mr. Mark Field (Cities of London and Westminster)

What recent representations he has received from United Kingdom manufacturing exporters; and if he will make a statement. [18694]

The Economic Secretary to the Treasury (Ruth Kelly)

The Chancellor and other Treasury Ministers frequently receive representations from manufacturers and all areas of business on a wide range of economic issues. We listen carefully and value their insights—as we did, for instance, at yesterday's manufacturing summit.

Paul Holmes

At meetings with union representatives and managers in my constituency of Chesterfield, I receive representations regarding the destruction of manufacturing industry. This year alone, three major traditional manufacturers—Sterling Tubes, Chesterfield Cylinders and Dema Glass—have either gone into administration or been closed down altogether. Those firms have told me that the overvalued pound against the euro cripples exports. Managers from Toyota at Derby have said that they can see no point in expanding that successful plant while there is no prospect of Britain entering the eurozone. The people to whom I have spoken want to know when the Chancellor will do something about ending the pound's ludicrous overvaluation compared with the euro.

Ruth Kelly

The Government's policy on the euro is clear. The most important thing that we can do for manufacturing is to provide a stable economic climate. By making the Bank of England independent and putting in place tough new fiscal rules, we have taken the necessary measures to ensure that. Artificially to manipulate the exchange rate of the pound as the hon. Gentleman suggests would be ludicrous. Quick fixes are not the solution for manufacturing—the solution is a stable economic climate. The Government are prepared to take the action that manufacturers so desperately need. That is why we held the manufacturing summit yesterday, at which my right hon. Friend the Secretary of State for Transport, Local Government and the Regions announced a further £20 million to help spread best practice within manufacturing.

Mr. Field

The Chancellor assured us last week that we could expect overall growth in the economy to be 2.25 per cent. in 2001. However, after four consecutive quarters of technical recession in the manufacturing sector, will the Economic Secretary say what level of growth in that sector she anticipates in the forthcoming year?

Ruth Kelly

As the hon. Gentleman should be aware, we gave those figures in the pre-Budget report. We are expecting an increase in manufacturing output during next

year. Of course, an open economy like the UK's cannot insulate itself from a global slowdown, especially when that slowdown affects countries such as the US, Japan and Europe. However, this country is better placed than any other in the Organisation for Economic Co-operation and Development to weather that international storm. That is why we are confident that manufacturing will continue to prosper in the future, and why we are taking measures now to ensure that manufacturing productivity and growth increase.

Mr. Nigel Beard (Bexleyheath and Crayford)

Does my hon. Friend agree that the future of manufacturing depends, crucially, on the rate of innovation? In that context, what responses have been received from business and industry for the proposed research and development tax credit for larger companies?

Ruth Kelly

The research and development tax credit, which the pre-Budget report announced would go out to further consultation, has been widely welcomed, particularly by the Confederation of British Industry. Digby Jones has said that it will make a very useful contribution. Of course, innovation is vital in raising productivity, particularly in the manufacturing sector. That is why we propose to extend the research and development tax credit throughout industry, with big companies benefiting as well as small and medium-sized enterprises. It is why we put in place 40 per cent. first year capital allowances for investment in plant and machinery. It is also why we are giving 100 per cent. capital allowances to all small firms that invest in information technology. The only way to enhance our productivity and close the productivity gap with our European and United States neighbours is through innovation and skills.

Mr. David Kidney (Stafford)

At the strategic level, does my hon. Friend accept that all the many welcome measures taken by the Treasury over the past four years to help small and medium-sized manufacturers may have sidelined the big companies which, after all, provide the growth and activity for those smaller companies? Does she therefore agree that the proposal for the new research and development tax credit for larger companies is a very welcome sign of a more inclusive approach to what I call the whole manufacturing family?

Ruth Kelly

Certainly, the extension of the research and development tax credits to all companies, large or small, will be welcomed across industry, and has already been welcomed by the CBI. Furthermore, our corporation tax reforms, which have been taking place over the five Budgets since the Government came to power in 1997, have slashed the corporation tax bills of manufacturers across the board. We now have the lowest corporation tax rates in the history of the United Kingdom. Overall, the United Kingdom has the lowest corporation tax rate of any major industrialised country. That is good news for manufacturers, big or small.

Mr. Nicholas Winterton (Macclesfield)

The Economic Secretary will know that aerospace is an important part of our manufacturing base and has, historically, made a massive contribution to exports. She will be aware that, sadly, in recent months there have been about 40,000

redundancies in the industry, in firms such as Rolls-Royce and BAE Systems. Do the Government have any plans to assist the industry during its current problems so that it will have a skilled work force when there is an upturn?

Ruth Kelly

As the hon. Gentleman is aware, the Government are committed to the future of the aerospace industry and have been helping the sector through direct assistance and also by means of the rapid response taskforce, which assists people who become unemployed. Of course, the aerospace industry has been particularly hard hit following the events of 11 September. We must now ensure that it has an environment in which it can restructure and develop. We are committed to working towards that. It is not all gloom and doom on the aerospace front, however. Recent contracts that have been won, such as the Lockheed Martin contract, will bring some welcome help to the employees and the company involved.