HL Deb 18 July 1988 vol 499 cc1053-4

2.42 p.m.

Lord Rodney asked Her Majesty's Government:

What is the latest information available concerning the level of investment planned by British industry for 1988–89.

Lord Beaverbrook

My Lords, the latest investment intentions survey carried out by Her Majesty's Government indicates that the level of investment, including leased assets, planned by manufacturing industry for 1988 amounts to £8.7 billion, an increase of 16 per cent. over the 1987 level. Indications for 1989 suggest a further, though smaller, increase.

Lord Rodney

My Lords, I thank my noble friend for that Answer. In view of the increased interest rates do Her Majesty's Government anticipate any slackening of these very encouraging investment rates?

Lord Beaverbrook

My Lords, it is no doubt obvious to many of your Lordships that higher interest rates in themselves will not encourage investment. However, industry has far more to fear from a resurgence of inflation. A 1 per cent. rise in interest rates, even if sustained for a full year, adds to costs only a quarter of the amount that a 1 per cent. increase in wage settlements would add. I believe that the stable state of the economy will enable business to plan far better for the future than it has for many years.

Lord Stoddart of Swindon

My Lords, is not the interest rate weapon a very blunt one? Does it not mean that at the same time as reining back consumer consumption and consumer credit, the Chancellor and the Government are also reining back investment and industry which are desperately needed to help keep down inflation?

Lord Beaverbrook

My Lords, as I have just said, investment is running at a very satisfactory level and at the moment is at a rate somewhat higher than the estimates in the FSBR. However, it is important to make sure that the growth in the economy is at a sustainable level. It would be quite irresponsible of government to let inflation run away. As I told your Lordships last week, the interest rate weapon is the Government's principal weapon in the war against inflation.

Lord Ezra

My Lords, while it is encouraging to note that industrial investment is increasing, will the Government hear in mind that tomorrow's investment in industry is based on today's research? What is being done to stimulate research in industry?

Lord Beaverbrook

My Lords, 1 know that the noble Lord attaches a great deal of importance to the matter of research, but it is a somewhat different question from the one on the Order Paper. If the noble Lord would like to table a Question on research. I should he happy to answer it.

The Earl of Halsbury

My Lords, can the noble Lord tell the House what kind of figures illustrate the difference between what is planned on any occasion and what is achieved?

Lord Beaverbrook

I think, my Lords, that it is something called hindsight.

Lord Peston

My Lords, I welcome the pick-up in investment this year but may I ask the Minister whether he intended to place his Answer in the context that the ratio of investment to gross domestic product, both as a ratio and relative to that of our own competitors, has been lower during the lifetime of this Government than it was during the previous Labour Government and also lower than it was during the Conservative Government of the early 1960s?

Lord Beaverbrook

My Lords, that may be the case but I think that the business sector can plan with far more confidence than was possible in the 1960s or 1970s. As I said, the Government attach the utmost importance to controlling inflation, and I believe that businessmen can have confidence that the Government's policy is to contain inflation. After all, an increase in inflation would be the most serious threat to business confidence.

Lord Boyd-Carpenter

My Lords, is not the point made by the noble Lord, Lord Peston, simply an indication of the gross domestic product having risen so satisfactorily as a result of the economic policies of Her Majesty's Government?

Lord Beaverbrook

My Lords, my noble friend is absolutely right and the level of investment is also very satisfactory.