Manufacturing Industry (Hansard, 25 October 2001)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, the Government recognise the difficulties of the manufacturing sector at the moment. However, the problems reflect the global economic situation. Comparing the latest available three months with the previous three months, manufacturing output fell by 4 per cent in Japan, 1.7 per cent in the USA, 1.2 per cent in the Eurozone and by 1 per cent in the UK.
The relationship between output and employment is very uncertain and varies from firm to firm. Therefore, the Government do not, in line with the convention adopted by previous administrations, produce forecasts of employment.

§ Baroness Miller of Hendon
My Lords, I thank the Minister for that comprehensive reply. Given that the figure mentioned at the TUC conference, which appears in my Question, was given before the tragic events of 11th September, I should like to go back a little if I may. The earlier figure relating to the number of jobs lost in manufacturing industry was 360,000 since 1997. Does that mean that the Government have presided over a boom or a bust?

§ Lord Sainsbury of Turville
My Lords, of course the Government, in terms of the general economy, have presided over a steady increase in both wealth and employment, which is due entirely to a very sound macro-economic policy. We have resisted the temptation of the previous government to go from a boom to a bust as their only strategy.

§ Lord Stoddart of Swindon
My Lords, does the Minister agree that the decline in manufacturing industry has been going on for a long period of time? Indeed, since 1973 its percentage of GDP has dropped from 32 per cent to 19 per cent at the present time. It is therefore a long-term business. Britain, instead of being the workshop of the world, has become the dumping ground of the world, which is most unfortunate.
1096 May I recommend to the noble Lord that he reads the Select Committee report of 1985 on overseas trade? I am sure that he will find many recommendations there which unfortunately were not taken up by the party opposite when it was in government.

§ Lord Sainsbury of Turville
My Lords, I remember answering a similar Question a few months ago. Perhaps I may remind the noble Lord that I pointed out then that in every industrialised country in the world, consistently over the past three decades, manufacturing as a percentage of GDP has declined. In 1999, the share of manufacturing in GDP in the UK was 19.2 per cent. That compares with 16.1 per cent in the US. If we are in difficulties because of manufacturing, we have to assume that the American economy is in even greater difficulties.
The reality is that there are two factors which mean that manufacturing as a percentage of GDP goes down; the first is increasing productivity in manufacturing and the second is the fact that as people become wealthier they buy as a percentage of their income fewer products. The result is that in every country manufacturing goes down as a percentage of GDP. The question to ask is whether that manufacturing is modernised manufacturing and whether it is adding real value to the economy. The percentage is largely irrelevant.

§ Lord Razzall
My Lords, will the Minister accept that two questions should be asked in addition to the question that he posed himself? First, does he accept that one of the major reasons for the loss of manufacturing jobs is that the pound is too high, in particular against the euro? Will he therefore accept that one practical action that the Government could take to lower that rate of exchange and therefore save manufacturing jobs would be to commit to a definite timetable for the pound sterling to join the euro?
Secondly, does the Minister also accept that a number of business regulations bear down particularly heavily on manufacturing industry? One obvious example is the climate change levy when what we should have is a proper system of taxation of carbon emissions. Does he further accept that in that respect the Government can do something to lift the burden from manufacturing industry?

§ Lord Sainsbury of Turville
My Lords, I believe that I answered that question, too, last time we discussed the issue. I hope it was clear from the figures I originally gave that this is not a UK problem uniquely. In fact, quite the contrary; the UK economy in this respect is doing rather better than other economies and for very good reasons. Therefore, arguments that this is due to regulations look simply as though people are not following what is happening out there in manufacturing industry, which is to do essentially with the slow-down in the economy.
1097 Of course we accept that the pound is higher against the euro than we would wish. I do not think that that is a reason for taking a sudden dash into the euro without looking at what the conditions are.

§ Lord Campbell of Alloway
My Lords, leaving aside boom and bust and what previous governments have or have not achieved, have this Government any estimate or projection of the loss of jobs in manufacturing industry over the next two years?

§ Lord Sainsbury of Turville
My Lords, as I said in my original Answer, following a convention which is now well established, we do not give forecasts of employment in the future, which is in any case extremely difficult to do.

§ Lord Taverne
My Lords, following on from the question asked by my noble friend Lord Razzall, would it not have a galvanising effect on manufacturing industry if we announced, first, that subject to a referendum we would be joining the euro; and, secondly, that we would seek to do so within a range of, say, 1.25 to 1.45 euros to the pound, enabling us then actively to intervene in the exchange markets to move towards that range?

§ Lord Sainsbury of Turville
My Lords, perhaps I may refer back to one of my previous answers. To rush into the euro without considering the conditions in which we do so would be a grave mistake. I am not certain that it would galvanise manufacturing industry in this context. It might be extremely worried about the basis on which it was being done.

§ Lord Lang of Monkton
My Lords, the Minister spoke about boom and bust under the previous Conservative administration. As unemployment fell consistently from the late 1980s and productivity, output and exports all rose by record amounts to record levels, when exactly did the bust occur?

§ Lord Sainsbury of Turville
My Lords, there was a very good bust in the early 1980s. There was another good bust in the later 1980s and there was one in the early 1990s. If the noble Lord was not aware of those, it reflects on his knowledge of manufacturing.