HL Deb 09 December 1981 vol 425 cc1338-40

2.48 p.m.

Lord Gridley

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether there has been any improvement in this country's international competitiveness since the beginning of this year.

The Minister of State for Defence Procurement (Viscount Trenchard)

My Lords, the Industry Act forecast estimates that competitiveness, measured by relative unit labour costs, has improved over 10 per cent. this year.

Lord Gridley

My Lords, I thank my noble friend the Minister for his reply. Was not that improvement of 10 per cent. achieved after the Government took office? Was the rate not in fact declining by 7 per cent. at that particular period? In other words, the increase has been 10 per cent. since the Government assumed office? And are not our exports at the present moment increasing by over £1 billion a week, in spite of the recession?

Viscount Trenchard

My Lords, my noble friend suggests that the figure of 10 per cent. which I have given could be applied to the period when the present Administration came to office. I do not think he is correct in that, although I can tell him that the current figure for the third quarter of this year is an all time high in the economic history of this country. It is an undoubted improvement. As far as exports are concerned, I will check my noble friend's figure, but certainly they stood up remarkably well through the most difficult period, from the point of view of competitiveness, and they are improving now.

Lord Avebury

My Lords, would the Minister not agree that international competitiveness is a function not only of unit labour costs but also of the exchange rate of the pound? Would not the noble Lord also agree that the enormously high exchange rate which has been maintained throughout this year—unrealistically in relation to the dollar and other currencies—is hindering our competitiveness abroad and preventing British manufacturers from raising their exports?

Viscount Trenchard

My Lords, I would not accept the noble Lord's explanation of the improvements. The exchange rate has indeed fallen to a level which perhaps many people expected to be more compatible with our international competitiveness, and certainly this has helped British industry in some respects. There is no doubt that in addition to the exchange rate movement, which has been helpful, the much leaner, fitter industry which has resulted from the last two years' difficult period is also a major reason. The output-per-man figures are at a record level and I hope this will mean that we can recover some of our lost share of world markets, which fell from 20 per cent. in 1960 to 8.5 per cent. by 1975.

Lord Jacques

My Lords, may I ask the noble Viscount: Would our industry be more competitive if it had to bear the whole cost of 3 million people unemployed?

Viscount Trenchard

My Lords, the reason why we have 3 million people unemployed is not due to the actions in the later years of the Labour Government, or indeed to the actions of this Government. It is for the reason that I have just mentioned; namely, that due to lack of competitiveness we lost over half of our share of world markets and a similar proportion of our own between 1960 and 1975. It has only shown up now because the unprecedented period of growth that took place in those years has come to an end.

Lord Gisborough

My Lords, would my noble friend agree that the moment is right for serious consideration of joining the EMS?

Viscount Trenchard

My Lords, Her Majesty's Government are noting carefully the progress of the EMS arrangements and have had under consideration for some time the question of the right moment to join. No decision has yet been reached.

Lord Kaldor

My Lords, would the noble Viscount agree if I suggested to him that, so far from our productivity in manufacturing industry being at record levels, it is still 4 per cent. lower than it was in the second quarter of 1979?

Viscount Trenchard

My Lords, not in output per man. If the noble Lord will read Hansard, he will see that is the factual situation.

Lord Mackie of Benshie

My Lords, would the noble Viscount not agree that perhaps a fall in interest rates might have as much beneficial effect as the fall in the value of the pound has had?

Viscount Trenchard

My Lords, interest rates are still relatively, but necessarily in world conditions, high. I believe that should they fall this will give a further impetus to the recovery of industry, where production, as opposed to productivity, has for the first time in the second and third quarters started to grow again.

Lord Paget of Northampton

My Lords, would the noble Viscount tell us what he means by the word "leanness" which he applies? Does it mean anything other than providing fewer jobs?

Viscount Trenchard

My Lords, yes, in relation to industry which is competing today we have quite clearly, according to the figures that I have given, a more competitive industry. That is what I meant by "leanness". Perhaps it is a colloquial expression. But we are undoubtedly more competitive.

Lord Kaldor

My Lords, is it possible that the noble Viscount confuses output per man in manufacturing industry with output per man-hour? It is true to say that in output per man-hour productivity, according to the latest figures, is 1 per cent. higher than in 1979, but that is only because man-hours worked per week are more than 10 per cent. lower.

Viscount Trenchard

My Lords, I do not accept the noble Lord's figures. By the various calculations, unit labour costs, output per man, productivity, we have shown improvements of the order that I have stated.

Lord Davies of Leek

My Lords, may I ask whether the noble Viscount is aware of the part played by invisible exports in maintaining a balance of payments in favour of Britain, not just over years but over a century or more? Secondly, what are the present Government doing to encourage banking, shipping, insurance and other invisible exports which are of paramount importance to our international trade?

Viscount Trenchard

My Lords, invisibles are another question. They are doing well. The Government support them, and they are part of the general economic recovery. But the answers that I have given are in reply to a Question concerning our manufacturing industry.