Manufacturing Industry Output (Hansard, 21 January 1986)

§ Lord Hatch of Lusby
My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, the index of output for manufacturing industry was 8 per cent. lower in 1984 than in 1979.

§ Lord Hatch of Lusby
My Lords, I thank the noble Lord for that Answer. Can he explain how it comes about that after six years of a government that is supposed to be restoring the economy of this country, manufacturing industry output has fallen during that period? Can the noble Lord further explain how it is that British manufacturing industry output has fallen by 8 per cent. in that period, whereas the output of West Germany's manufacturing industry has fallen by no more than 0.5 per cent., and that of France by no more than 3.78 per cent.?

§ Lord Lucas of Chilworth
My Lords, in the six years 1979 to 1985 the fall was as I have described. There was a trough in 1981. Since 1981 manufacturing output has been increasing steadily. Your Lordships will recall that the world recession in trade occurred at about that time. If one looks at a similar graph for the Community as a whole, or indeed France or West Germany, one will see very similar patterns. The figures may be slightly different. There was a depression in 1979 in both France and Germany. An increase occurred in 1983 and is continuing.

§ Lord Mowbray and Stourton
My Lords, bearing in mind the question by the noble Lord, Lord Hatch, may I ask what is the level of support that the Government are providing to promote the growth of employment in this matter?

§ Lord Lucas of Chilworth
My Lords, the Government support for employment covers other areas than just manufacturing. I am sure that my noble friend will appreciate that. However, in 1985–1986 some £1,860 million worth of expenditure on employment services and training schemes is anticipated with a further increase during 1986 and 1987. But that is of course across the range of employment.

§ Lord Ezra
My Lords, would the noble Lord not agree that while there have been striking successes in the manufacturing sector of British industry in recent years, we need many more such successes? How do the Government see their role in stimulating these further successes?

§ Lord Lucas of Chilworth
My Lords, I am grateful to the noble Lord, Lord Ezra, because he is quite right. The policies of the Government—particularly financial policies—have led to a much fitter industrial industry which is more able to compete with the overseas markets. One recognises that in many of the traditional industries there is still a decline. Nevertheless, the policies concerning company taxation, employment, insurance surcharges and lifting burdens on business and others, are all designed to stimulate, and are having the effect of stimulating, industry to better performance both at home and abroad.

Lord Bruce of Donington
My Lords, is the noble Lord aware that the very drastic decline in manufacturing output (which went down between 18 and 20 per cent.) that took place immediately after 1979 and continued into 1981, decimating the British industry, was caused by deliberately imposed, highest- 114 of-all interest rates, with the maintenance of an artificially high rate of exchange that made British exports quite uncompetitive? Would the noble Lord also bear in mind that the present signs are that interest rates are going to be raised again thus forcing the exchange rate even higher than it should be, and thus inflicting further damage on the competitiveness of British manufacturing industry?

§ Lord Lucas of Chilworth
My Lords, I do not accept the first part of the supplementary question of the noble Lord. The decline in the manufacturing figures after 1979 was in part due to the policies of the preceding Administration added to the consequence of a world recession brought about by the second oil crisis. This recession hit an industry already suffering from poor competitiveness following the years of very high inflation, which again are attributable to the Administration of which the noble Lord was a part.

§ Lord Avebury
My Lords, we are now in 1986. Would the Minister agree that if, as a result of a decline of two cents in the value of the pound, interest rates are allowed to go up yet again British industry will be hit twice? It would be hit once by a fall in its competitiveness compared with overseas suppliers by the difference in exchange rate, and secondly by the increase in the cost of borrowing.

§ Lord Lucas of Chilworth
My Lords, that may well be so, but let me make it quite clear that manufacturing industries are participating in a growth and that output is well into its fifth year of growth: it is now 13 per cent. above the 1981 first quarter trough. The indications are that it will continue in that direction. The CBI forecasts and others indicate that it is on a growth pattern.

§ Lord Hatch of Lusby
My Lords, the noble Lord has said that British manufacturing industry is fitter because of the policies of this Government. How can industry be fitter if it is producing 8 per cent. less, despite the fact that the Government have had the advantage of the oil revenues during that period? Moreover, the noble Lord gave a list of the advantages which the Government claim British industry is now enjoying, but what he did not mention is that last year investment in manufacturing industry in this country was 18 per cent. lower than it was in 1979, when the Government came into office.

§ Lord Lucas of Chilworth
My Lords, the noble Lord, Lord Hatch of Lusby, has taken—and I do not object to it—the two years 1979 and 1981, which he knows (because he has read the graph) are the worst in our history for many years. Although we came into office in 1979 at a time of world recession and started implementing our policies, by 1981 those policies and the general upturn which those policies were designed to assist had shown that manufacturing production was increasing, and it has steadily increased in the last five years. Investment in British industry is now at a record level and is continuing; and so is productivity, profitability, the creation of wealth and employment.

The Earl of Halsbury
My Lords, is it not a waste of time jogging backwards over what happened in 1979? 115 Do we not live in an immensely complicated system of international interchange, only part of which is under our own control? Ought our thoughts to be not on the past but on where we stand today and how we hope to improve our situation tomorrow?

§ Lord Lucas of Chilworth
My Lords, I am most grateful to the noble Earl, Lord Halsbury, for those comments, with which I of course agree. In looking forward, as this Administration does, if we continue our policies we shall end 1985 in a stronger position than was the case in 1984, 1983, 1982, and 1981. Over the rest of this decade we look forward to improving that position even further.

Lord Bruce of Donington
My Lords, is the noble Lord aware that, even though it may be inconvenient politically to look at the lessons of the past, very often it is the truest wisdom to have some regard to them?

§ Lord Lucas of Chilworth
My Lords, we can all learn lessons from the past, and I think that the electorate of this country in fact learned that at the last election.

§ Lord Hatch of Lusby
My Lords, with respect, the noble Lord did not answer my second supplementary question. Is it the case that last year, 1985, investment in manufacturing industry in this country was 18 per cent. below that of 1979? Does this hold out hopes for the future?

§ Lord Lucas of Chilworth
My Lords, the answer is that last year investment was at an all-time record, and it is increasing. The prosperity of our nation will lie in further and greater investment in our industries as a whole. That is happening.