HL Deb 19 April 2000 vol 612 cc697-9

2.38 p.m.

Lord Islwyn

asked Her Majesty's Government:

What is the present level of manufacturing industry in the British economy as a percentage of gross national product and how this figure compares with 1979.

Lord McIntosh of Haringey

My Lords, industry shares of gross national product are not available. However, the manufacturing share of gross value added has declined since the 1970s, from around 26.5 per cent in 1979 to 20 per cent in 1999.

Lord Islwyn

My Lords, does the Minister appreciate that since the 1950s there has been a steady decline in manufacturing industry as a percentage of gross domestic product? This is a sector on which regions like Wales and the north of England rely for their economic well-being. Does my noble friend recognise also that, despite the success of the services industry, manufacturing industry provides 62 per cent of our exports? Is it not disturbing, therefore, that, for the past six quarters, investment in manufacturing industry has fallen? If we go on like this, we risk sacrificing our future. Cannot the Government prevail on our companies to invest in British manufacturing industry?

Lord Mcintosh of Haringey

My Lords, I am afraid that my noble friend is right about the decline of manufacturing industry. However, I have more recent good news in relation to investment. There has, indeed, been a decline in investment in manufacturing industry, but in the fourth quarter of last year—the most recent quarter for which we have figures—there was an increase of 4 per cent. The Government have been trying to increase investment in manufacturing industry with our cut in corporation tax to its lowest level ever, with the removal of ACT, and with the 40 per cent first-year capital allowances for small and medium establishments.

Lord Ezra

My Lords, does the Minister agree that, in spite of the fall in manufacturing capacity in the post-war period, nevertheless manufacturing remains a potent force in the economy of the country? It provides 4 million jobs and, as the noble Lord, Lord Islwyn, pointed out, over 60 per cent of our exports. In those circumstances, is it the Government's aim and objective to build on that capacity? Bearing in mind the problems that manufacturing industry faces not only with high interest rates but also with the high value of sterling, do the Government accept that a basic requirement is the increased application of new technologies to industrial processes, for which increased investment is required, thus leading to a closing of the productivity gap between us and our main competitors?

Lord McIntosh of Haringey

My Lords, that is a complex set of interlinking questions. It is the Government's intention to maintain and build on our manufacturing sector because we recognise its importance for the economy and for our exports. Again, I have more recent good news in that exports of goods increased by 7 per cent in the past six months compared with the previous six months. I have already answered the question in relation to investment in indicating the help that we are giving to promote investment in manufacturing industry. It is true that changes in technology demand substantial increases in investment.

Lord Roberts of Conwy

My Lords, in view of the decline, particularly in employment in manufacturing, and as many future jobs will depend on it, should not the Government actively promote manufacturing rather than undermine it by excessive taxation and regulation?

Lord McIntosh of Haringey

My Lords, the Government certainly promote manufacturing industry in this country and through many trade missions abroad. I have given evidence of the extent to which we encourage investment in manufacturing industry through our taxation policies. I reject the accusation of the noble Lord.

Lord Dormand of Easington

My Lords, my noble friend Lord Islwyn mentioned the north of England. I confirm his comments, but at the same time I congratulate the Government on the £100 million which is now earmarked to revive the coal industry even though there is only one pit left in the north-east. That pit has, however, been saved. What have the Government in mind with regard to shipbuilding?

Lord McIntosh of Haringey

My Lords, I was as pleased as my noble friend to see photographs of relieved miners at Ellington colliery Unfortunately, my noble friend asked a Starred Question on the coal industry on Monday half an hour before the Secretary of State for Trade and Industry made his Statement. Therefore, I was not able to give the good news that I knew he sought. The problem with the shipbuilding industry is that the size of individual orders is large and if one order is lost—as happened recently in Northern Ireland—that has a huge effect on employment and on the economy. However, we continue to give the support that we can.

Lord Campbell of Croy

My Lords, are the Government taking into account the fact that manufacturing industry may well suffer from, and be reduced as a result of, the climate change levy as proposed? Given that many firms are energy based but not labour intensive, they will not be compensated by the return of national insurance contributions under the Government's plan. Those firms which employ few people but are very dependent on energy will suffer. Nothing the Government have yet done has been sufficient to correct that situation.

Lord McIntosh of Haringey

My Lords, the imposition of the climate change levy is the only way in which we can fulfil our international obligations to achieve a sustainable environment. The noble Lord is correct to say that parts of manufacturing industry are energy intensive and that they will suffer from the provision. However, a large sector of manufacturing industry has high employment and relatively low energy use.

Lord Randall of St Budeaux

My Lords, does my noble friend agree with me that it is not so much sectors that are the issue here, but rather the kinds of businesses that are being established? If we are to have economic reform and job creation, we must encourage the creation of small and medium-sized enterprises to a far greater extent. Does he also agree that the Welsh economy in particular could benefit from the creation of SMEs rather than relying on big companies investing in the Principality?

Lord McIntosh of Haringey

My Lords, some time ago I mentioned the special help which is being given to small and medium enterprises particularly in terms of first-year capital allowances. My noble friend is right to say that much job creation arises from small and medium enterprises which, it is hoped, will grow into large enterprises.