Industry: Production and Investment (Hansard, 23 January 1991)

§ The Minister of State, Department of Trade and Industry (Lord Hesketh)
My Lords, data for output of the production industries at constant prices are published in index form, with the average for 1985 equal to 100. The index for November was 106.7. Data for gross domestic fixed capital formation by the production industries alone are not available. But the figure for business investment in the third quarter of 1990 was £13.828 billion at constant prices.

§ Lord Hatch of Lusby
My Lords, will the Minister give the House the benefit of his knowledge and tell us how the figures which he has just given compare with those for the previous quarter—or, for the previous month if he wishes—and those for the same period in 1989?

§ Lord Hesketh
My Lords, the comparison with respect to 1989 is 109.8.

§ Lord Peston
My Lords, has the Minister seen the CBI figures which show that the United Kingdom invests less in fixed capital per employee than its major competitors? The confederation also states in its advice to the Chancellor of the Exchequer that such an investment gap cannot be afforded in the light of the growing competitive pressures created by the single market and ERM membership. Do the Government agree with what the CBI has said about investment? More important, are they likely to do anything about investment in time to save British industry?

§ Lord Hesketh
My Lords, the reality, which may come as a surprise to the noble Lord, Lord Peston, is that business investment has risen in real terms by about 50 per cent. since 1979. It is worth remembering that the average family in Britain is 31 per cent. better off now in real terms than was the case in 1979.

§ Lord Peston
My Lords, I appreciate the fact that the noble Lord may have difficulty in actually answering the question. However, perhaps I may put it to him again. There was a minor investment boom in the 1980s, as no doubt he is aware, which has now come to an end. The truth is that our industry is underequipped compared with those of our competitors. In an endeavour to defend themselves, it does the Government no good to fail to realise the needs of British industry. I am not pressing the point; it is the CBI that is doing so. Do not the Government feel that they should at least respond to the desires of their friends, even if they do not care for those of their critics?

§ Lord Hesketh
My Lords, if that investment boom was "minor", I fear that the noble Lord, Lord Peston, would be as surprised if he were to be run over by a double-decker bus.

§ Lord. Ezra
My Lords, following on from the supplementary question put by the noble Lord, Lord Peston, have the Government in mind, in addition to the eventual reduction in interest rates, offering some other assistance to industry to stimulate investment? For example, have they given any thought to improving investment allowances?

§ Lord Hesketh
My Lords, it is a fact that investment increased after the introduction of changes in the rules for capital allowances. It is also a fact that last year the motor car industry, against all odds, increased its level of exports to a record level not achieved since 1973. There has been virtually no fall in consumption. I am sure that the noble Lord, Lord Ezra, was one of the great supporters of our entry into the European exchange rate mechanism. We are achieving stability under a system which was promoted by both sides of your Lordships' House.

§ Lord Callaghan of Cardiff
My Lords, is the noble Lord aware that, in answering Questions, the Government's case is not strengthened by displays of either arrogance or ignorance? I refer especially to his previous answer.

§ Lord Hesketh
My Lords, since I first came to your Lordships' House I have always been willing to accept that I might not have had the greatest education. However, I have to say to the noble Lord, Lord Callaghan, that it has never been a desire or an intention on my part ever to show arrogance in your Lorships' House.

§ Lord Stoddart of Swindon
My Lords, with reference to Britain's entry into the ERM, does the noble Lord now accept that the stability to which he referred has come about as a result of falling production and rising unemployment? Does he accept that that is a result of our entry into the ERM?

§ Lord Hesketh
My Lords, even more important, and above any entry into the ERM, is the 226 Government's desire to control inflation. That is our number one priority. I refer the noble Lord, Lord Stoddart, to my previous answer concerning output in the motor car industry: there is success and, at the same time, we are controlling the disease.

§ Lord Molloy
My Lords, does the Minister agree that there should perhaps be some alternative to the policy of always increasing interest rates which, most of all, seems to hammer those people who have decided to buy their own home?

§ Lord Hesketh
My Lords, it is worth pointing out that since we joined the ERM interest rates have been reduced by 1 per cent.

§ Lord Hatch of Lusby
My Lords, does the noble Lord agree that both production and manufacturing investment are declining drastically? Perhaps he may recall the answer of the previous Front Bench spokesman on employment when referring to the long-term economic success of the country. Does not the decline in investment in manufacturing industry cast a a very grave shadow over our prospects for any kind of economic recovery or economic success in the future?

§ Lord Hesketh
My Lords, business investment fell in the third quarter of 1990 by 1.9 per cent., which is the first fall since 1985.

Lord Bruce of Donington
My Lords, is the noble Lord aware that the supplementary question put to him by my noble friend Lord Hatch referred specifically to manufacturing industry investment and not to the rather larger term that he used—namely, "business"—which encompasses a whole series of other services? Is he also aware that investment in manufacturing industry is now showing a drastic decline and that at present it is running at a lower level in real terms than it was in 1979?

§ Lord Hesketh
My Lords, as always it is a pleasure to answer a question put forward by the noble Lord, Lord Bruce of Donington. However, I feel that I should draw his attention to the Question on the Order Paper which does not refer to manufacturing industry. It refers to figures for, "industrial productions and investment". Within that context, I have done my best to answer the Question.