HC Deb 24 January 2002 vol 378 cc997-1000
5. John Barrett (Edinburgh, West)

If he will make a statement on the impact of the level of the pound on the manufacturing industry in Scotland. [27555]

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

What assessment he has made of the impact of UK interest rates over the past three years on the UK manufacturing sector. [27557]

The Financial Secretary to the Treasury (Mr. Paul Boateng)

The Government's latest assessment of developments in the manufacturing sector, based on all relevant factors, was published in November's pre-Budget report. The world economy slowed significantly last year, and this has clearly affected manufacturing in all parts of the United Kingdom and throughout the rest of the G7. Nevertheless, the UK is now in a better position than on previous occasions to cope with the turbulence in the world economy.

John Barrett

Yesterday, Scottish manufacturers reported that they had suffered the sharpest drop in exports for three years, with output and employment falling. What more can the Chancellor do to help Scottish manufacturers? How long will we have to wait for action, especially when further falls in output, productivity and employment are predicted?

Mr. Boateng

Scotland, of course, cannot be insulated from the global downturn. Scottish manufacturers—and I was up in Scotland last Friday talking to one section of industry there—appreciate that not only have they been assisted by the sound public finances that now benefit the United Kingdom, the action that has been taken in terms of the Scottish Executive and the RDA but, importantly, the cuts in corporation tax and capital gains tax as well as research and development tax credits. All those measures contribute to a sound basis for manufacturing industry. That, rather than anything else, is likely to bring benefits in the medium term.

Mr. Mark Field

In view of the relatively rosy picture of the UK economy that the right hon. Gentleman has painted, will he go into some detail as to why he believes that the manufacturing sector, compared with others, is doing so badly?

Mr. Boateng

I do not think that there is any question of painting a rosy picture or of any complacency. I refer the hon. Gentleman to the words yesterday of Mr. Martin Temple, the director general of the Engineering Employers Federation. He referred specifically to the incredibly powerful base of our manufacturing industry. What he also called for—something that the Government are providing—is joint action to encourage investment in research and development and in plant and to ensure that we have the skills available in our economy to promote manufacturing. All those things have been addressed by the Government. They are judged in the pre-Budget report to be important and they are being delivered.

Mr. Iain Luke (Dundee, East)

I congratulate my right hon. Friend on his recent visit to Scotland. Does he agree that the measures introduced in the pre-Budget report will be of specific relevance and importance to small businesses in Scotland, creating more productivity and competitiveness and increasing investment in enterprise, which will, in the long term, mean more jobs in the Scottish economy?

Mr. Boateng

My hon. Friend takes a particular interest in small and medium-sized enterprises in Scotland. His analysis is absolutely right. It is significant that there has been a greater number of business start-ups in Scotland and that those businesses are more likely to succeed and endure as a result of this Government's policies and actions than ever was the case under the last Government.

Mr. Ian Davidson (Glasgow, Pollok)

Notwithstanding those points, does the Minister accept that the level of the pound is higher than is good for manufacturing industry and that, indeed, if we are ever to consider joining the euro, the present exchange rate is unsustainable and Britain would require a devaluation?

Mr. Boateng

No, I do not agree with my hon. Friend, although I respect his views. The issue is not the strength of the pound, but the weakness of the euro. The Government's objective is to make sure that exchange rates remain stable and that we have a competitive pound in the medium term. The best contribution that the Government can make is to ensure that we maintain sound public finances and low inflation. This Government, unlike our predecessors, have delivered and will continue to deliver that.

Mr. Edward Davey (Kingston and Surbiton)

Does the Minister think it right for the Government unilaterally to seek to redefine national statistics classifications in order artificially to boost manufacturing output figures?

Mr. Boateng

We have done no such thing. My right hon. Friend the Secretary of State for Trade and Industry has rightly pointed out the contribution that the services sector makes to industrial output. That is a perfectly proper reflection for her to make and one that the hon. Gentleman would do well to consider himself.

Ms Meg Munn (Sheffield, Heeley)

My right hon. Friend will know that many of my constituents work in the steel industry. Does he agree that while a more favourable exchange rate would be important, equally important is the stability that the Government are delivering in the economy, which enables the steel industry to plan for the future?

Mr. Boateng

My hon. Friend takes a particular interest in the steel industry for understandable reasons. I am grateful to her for the representations she makes on its behalf. Her analysis is absolutely right and the steel sector recognises that.

Mr. John Bercow (Buckingham)

Given that manufacturing output has slumped by 5.5 per cent. in the past 12 months, that the Engineering Employers Federation, to which the Financial Secretary has just referred, says that the climate change levy punishes competitiveness and initiative by world-class manufacturing companies and that the Director General of the CBI says, "I have members in south Wales and the midlands who are laying off people in order to write cheques to the Government to pay the energy tax", is it not time that the Secretary of State for Trade and Industry and the Minister for Europe stopped blaming the exchange rate for the problems of British manufacturing industry and started to do something to arrest and reverse the tide of regulation that is drowning British businesses the length and breadth of the land?

Mr. Boateng

The reality is far from that. Under this Government we have taken steps to make sure that manufacturing is put on a sound basis. Under this Government when we have taken steps to deliver on our Kyoto obligations we have involved industry, including the manufacturing sector, in order to help us design the effective tools to do that. That is why we invited Lord Marshall, whose leadership of the CBI was without parallel, to help us devise a climate change levy. That is what is delivering our Kyoto obligations and it is our sound management of the economy that is delivering to manufacturing industry. The sooner the hon. Gentleman learns that, the better. He should stop giving lectures to this House and continue to give lectures to his constituency party and his party because they have need of them.

Kevin Brennan (Cardiff, West)

Is it not the case that the long-term interests of manufacturing industry in Scotland, Wales and rest of the United Kingdom are served by an economic policy that pursues low inflation, high growth and productivity, and that those things have been achieved by the present Government's economic policy? The only manufacturing that we get from Conservative Members is manufactured synthetic anger. Is it not the case that a policy of devaluation would fail because it is short-termist and short-sighted?

Mr. Boateng

I could not have put it better myself.

Forward to