HL Deb 01 May 2001 vol 625 cc558-60

3 p.m.

Lord Roberts of Conwy asked Her Majesty's Government:

Whether they are satisfied with the effects of their economic and fiscal policies on the United Kingdom's manufacturing industry.

Lord McIntosh of Haringey

My Lords, manufacturing output grew by 1.6 per cent in 2000, the fastest rate of growth since 1994. Both the Government and independent forecasters expect further growth this year.

Lord Roberts of Conwy

My Lords, the noble Lord will know that 350,000 jobs have already been lost in manufacturing industry. He will also know that thousands more are due to go in the new technology sector. He may also be aware that first quarter growth is down to a near recessionary 0.3 per cent. In view of all that, how do the Government propose to meet their high spending targets without increasing taxation and thereby depressing industry and investment still further?

Lord McIntosh of Haringey

My Lords, the decline in manufacturing industry as a proportion of all employment in this country has been going on for many years. Indeed, Sir Kit McMahon reminded us recently that we have not had a surplus in exports of goods since the 1840s. In point of fact, the decline in manufacturing employment in this country is now at half the rate that it was under the previous Conservative government between 1979 and 1997. Of course, it is still not satisfactory. But we have taken all of those facts into account in the Chancellor's Budget programmes.

Lord Barnett

My Lords, my noble friend will be aware that the House's new Select Committee on Economic Affairs is looking at the whole issue of globalisation. In that context many multinational companies are larger in market capitalisation than many small countries. How does he suggest our Government, or any other government of this country, can help manufacturing industry here?

Lord McIntosh of Haringey

My Lords, the committees of your Lordships' House have a distinguished record in looking at manufacturing industry since the outstanding report of the late Lord Aldington. I look forward with great interest to the conclusions of the economic affairs committee and to responding to them.

Lord Clark of Kempston

My Lords, can the Minister explain the logic behind government thinking to give a tax incentive to savings with the proposed baby bonds yet at the same time penalise pension funds, which are of such importance to manufacturing and every other industry in this country? What is the Government's logic?

Lord McIntosh of Haringey

My Lords, the noble Lord, seems to have forgotten that it is only a couple of months since his own party was proposing considerable tax incentives for savings and criticising us for not doing so. I do not know on what basis he has now changed to criticising the baby bonds proposals.

Lord Hooson

My Lords, will not the noble Lord now reply to the question of his noble friend Lord Barnett? How can this Government, or any government, affect the placement of manufacturing industry in this country when it is controlled in the global economy by companies whose budgets are much larger than many national units?

Lord McIntosh of Haringey

My Lords, of course I acknowledge the truth of what the noble Lord, Lord Hooson, and my noble friend Lord Barnett say. It is the case that multinational companies have great freedom as to where they place their investment. However, it is the fact that the UK has been punching well above its weight in acquiring its share of inward investment into Europe for a number of years. Despite the difficulties experienced and expressed in the questions, we still have a high proportion of inward investment to this country. Our flexible labour market conditions, our stability and freedom from boom and bust must have contributed to that.

Lord Tomlinson

My Lords, will my noble friend correct me if I am wrong? In recent months bodies such as the IMF, the European Central Bank, the Commission of the European Union and the G7 have all praised the fiscal policies of her Majesty's Government and said that they have left the United Kingdom with an economic situation in which we are better placed than any other economy to withstand the threat of recession that currently faces us following the downturn in the United States.

Lord McIntosh of Haringey

My Lords, I am glad to have confirmation, both from my noble friend and the sources he quotes, of what I attempted inadequately to say in answer to the last question.

Lord Saatchi

My Lords, does the Minister remember when, in the long years of opposition, his colleagues in another place wore their hearts on their sleeves about the sad state of British manufacturing? Where are their hearts now that they themselves are presiding over an official recession in manufacturing and, as my noble friend said, the loss of hundreds of thousands of manufacturing jobs?

Lord McIntosh of Haringey

My Lords. I have already made clear in my answers that the continuing and long-standing decline in manufacturing jobs is not welcome to the people of this country or to Her Majesty's Government. However, the noble Lord is quite wrong in saying that we are under any definition of recession in manufacturing industry. According to the latest figures—for the three months to February of this year—compared with the previous year, manufacturing productivity rose by 6 per cent. manufacturing exports rose by more than 10 per cent, including more than 6 per cent to the European Union, and as I said in my first Answer, manufacturing output is still growing.