HL Deb 15 April 1993 vol 544 cc1178-81

3.18 p.m.

Lord Dean of Beswick asked Her Majesty's Government:

Whether, in the light of recent reports concerning United Kingdom manufacturing industry and industry in general, they are considering any further remedial initiatives.

Baroness Denton of Wakefield

My Lords, the Government's commitment to manufacturing industry is at the heart of our policies. That is why, for example, the Budget cut the burden on business by £1 billion and why export credit premia will be 7.5 per cent. lower on average in 1993–94.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for that Answer. I am glad to see that the Government have done a U-turn away from the service industries in an effort to solve the problem of unemployment. Is she aware of the exchanges that took place in another place two or three weeks ago when the President of the Board of Trade was forced to admit that a leaked report from his department—the competitiveness unit report—showed that British manufacturing industry was now so uncompetitive compared with its rivals that it would take decades to correct the imbalance? Does she agree that we should look for some further measures to stimulate industry and the economy in addition to what is already being done to deal with the situation?

Baroness Denton of Wakefield

My Lords, let me first reassure the noble Lord that there is no U-turn. We believe that both manufacturing and service industries have important parts to play in the country's recovery. Perhaps I may suggest that he refers to leaked documents rather less selectively and point out that the leak that occurred also drew attention to the fact that since 1980 manufacturing productivity in the UK has improved at a faster rate than in Germany, France, Italy or the United States.

Lord Boyd-Carpenter

My Lords, does my noble friend agree that one of the best ways of continuing that happy process which she has just described is to reduce the burden of taxation, particularly income tax and VAT, which tends to discourage the promotion of industry and demands very rigid economy in public expenditure?

Baroness Denton of Wakefield

My Lords, this Government's policy has always been to keep taxation at minimum levels to encourage entrepreneurship. It seems to be working. The figures announced yesterday for manufacturing production were 1.2 per cent. up on the previous three months.

Lord Stoddart of Swindon

My Lords, will the noble Baroness confirm that since we left the exchange rate mechanism our exports have become very much more competitive as they are now cheaper abroad? Are not our exports in fact improving rapidly? Will she give me and the House an assurance that under no circumstances will we go back into the exchange rate mechanism?

Baroness Denton of Wakefield

My Lords, in the first instance I agree with the noble Lord, Lord Stoddart, that indeed we see benefit in exports. I hope that in the near future we shall see benefit in people sourcing from the UK goods which were previously sourced overseas. However, I am sure that the noble Lord would not expect me to make announcements on the Treasury's behalf.

Lord Clark of Kempston

My Lords, does my noble friend agree that, while acknowledging the fiscal help given to the manufacturing sector of the economy, it would help investment, particularly in the manufacturing industry, for capital allowances to be on a straight line reduction rather than on a reducing line? That would be bound to help investment. I remind my noble friend that at the moment on capital allowances it takes about nine years to write off the value of an asset.

Baroness Denton of Wakefield

My Lords, we believe that we should support the ability of manufacturing industry to operate within its own scenario, making its own decisions.

The Earl of Halsbury

My Lords, does the Minister agree that there is no such abstract entity as "industry in general"? There are only specific industries. We need to have a list of those who are failing to pay for their imports of raw material and those who are failing to pay for imported food for their employees. Until we have that information we cannot know what we are talking about.

Baroness Denton of Wakefield

My Lords, while agree with the noble Earl that the balance of payments is based on two parts of an equation—imports and exports—it is important to know where the growth is in exports. Perhaps I can again draw attention to yesterday's figures which show that the largest rises were in the chemical industry-2.7 per cent. up on three months—and in the engineering industries where the situation is particularly pleasing with a 1 per cent. increase.

Lord Ezra

My Lords, while there has been recent welcome news on improvements in industrial production, to which the noble Baroness referred, nevertheless would she agree that the fundamental problem affecting British manufacturing industry is the lack of sufficient capacity? It is a long-term problem and it is not something that has arisen today; it has been arising over many years. Will not the Government give some attention to the matter? Will they share their thoughts on the subject by either issuing a consultative document, as the noble Lord, Lord Benson, frequently proposed, or in some other way? We shall then be able to get to grips with the fundamental problem affecting our manufacturing industry.

Baroness Denton of Wakefield

My Lords, I agree with the noble Lord, Lord Ezra, that one of the major problems is lack of capacity and that the growth of capacity must be a focus. As I have explained many times in the past to the noble Lord, Lord Benson, and to my noble friend Lord Peyton, we believe that it is important that the Department of Trade and Industry should get as close as possible to industry, with which it is working, and reflect its need to increase performance as fast as possible rather than publish overall documents. The capacity that we require concerns not only plant but also skilled people.

Lord Peston

My Lords, I was disappointed with the answer given by the noble Baroness on the exchange rate mechanism. I thought that the Government were going to a great deal of trouble over Maastricht for all kinds of purposes, one of which was that we become part of the exchange rate mechanism. I hope that the noble Baroness will not forget that.

I understood that the so-called leaked report was rather uninteresting and that in the other place her right honourable friend said that it did not contain anything new. Will the Minister tell her right honourable friend that as an economist I have an interest in the subject and that several other noble Lords are probably equally interested? It may contain nothing new but we should still like to see it, if only to refresh our memories about the state of British manufacturing industry. It is difficult to know what the Government wish to hide. It would be interesting to see the document. Can the Minister at least suggest to her right honourable friend that we may like to see it even though it is only a leaked copy?

Baroness Denton of Wakefield

My Lords, the noble Lord, Lord Peston, well knows that advice to Ministers is not normally published. The President of the Board of Trade restructured the Department of Trade and Industry last year to reflect closer relationships with sectors of industry and to institute a competitiveness department, whose job it is to inform us of our place with regard to competitors, as indeed would any manufacturing industry. It is an ongoing situation.

Lord Peston

My Lords, can the noble Baroness clarify the position because I am now a little lost? Is it a document that gives official advice to Ministers? I thought that it was a research document. That is why I find the situation puzzling. I do not want to know about advice to Ministers. However, I should like to know essentially what the view is in regard to the state of the manufacturing industry. Can the Minister have another look at the matter or at least ask her right honourable friend to do so?

Baroness Denton of Wakefield

My Lords, perhaps I may bring the noble Lord, Lord Peston, back to the Question. The Question concerns the state of the manufacturing industry and straightforwardly on that I am happy to say that it is good and improving.

Lord Eatwell

My Lords, is the Minister aware that the most disturbing comment she has made this afternoon is to say that there is no U-turn? Given the fact that over the past 14 years of Conservative rule manufacturing industry has enjoyed—if that is the right word—a growth of less than 0.5 per cent. per year, the lowest in the G7, and we have seen our share of world manufactured trade fall, does she consider that policy to be a success?

Baroness Denton

My Lords, the U-turn to which I referred was the one mentioned by the noble Lord, Lord Dean, in regard to our policy on service industry. I want to make it quite clear that we still believe that the service sector is of great importance to this country. The fact that we have outstanding productivity performance in our manufacturing industry answers the noble Lord's question.

Lord Dean of Beswick

My Lords, in reply to my supplementary question the Minister accused me of being selective in what I quoted from the report, and then proceeded to be more selective herself by completely ignoring the point that I made. In my question I asked the Minister whether she was aware that the report said that we were totally uncompetitive and that it would take decades to correct the imbalance. The report comes from her department. Is it right or is it wrong? If it is right, what are the Government going to do about it?

Baroness Denton of Wakefield

My Lords, I did not wish to ignore the question of the noble Lord, Lord Dean. I thought that I indicated that his initial quotation was a superficial first cover in the leak and that the leak went on to point out that the state of manufacturing was such that we were moving faster than most of our European competitors and the United States.