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Mr. Speaker : The hon. Member for Kingston upon Hull, East (Mr. Prescott) asks leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the information concerning warnings received prior to the Lockerbie tragedy, which has this afternoon been disclosed on The World at One' radio programme."
As the House knows, under Standing Order No. 20, I have to take into account the requirements of the Standing Order and to announce my decision without giving reasons
Column 556to the House. I have listened with care to what the hon. Member has said. As he knows, my sole duty in considering an application under Standing Order No. 20 is to decide whether it should be given priority over the business already set down for this evening or on Monday. I regret that the matter that he has raised does not meet the requirements of the Standing Order. I therefore cannot submit his application to the House.
Mr. Wilshire : As I am new here, Mr. Speaker, I seek your guidance on this matter. Do the Standing Orders provide any way for an hon. Member who has been named, as I have been named, to nail half-truths and false information and to put the record straight?
Mr. Wilshire : It is important. If I understand you correctly, Mr. Speaker, it is proper for me, if I give notice under Standing Order No. 20, to make whatever irresponsible claims I like, and no hon. Member would be able to answer me back? Is that what the Standing Order says?
Mr. Speaker : The hon. Gentleman has been here long enough to know that every right hon. and hon. Member must take responsibility for what he says. Provided that it is in order, I have no way of stopping it.
That the draft Civil Legal Aid (Financial Conditions) (Scotland) Regulations 1989 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Advice and Assistance (Financial Conditions) (Scotland) Regulations 1989 be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Fallon.]
Order read for resuming adjourned debate on Question [14 March].
Motion made, and the Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance ; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide--
(a) for zero-rating or exempting any supply ;
(b) for refunding any amount of tax, otherwise than in a case where the amount has been paid by reason of a mistake ;
(c) for varying the rate of that tax otherwise than in relation to all supplies and importations ; or
(d) for relief other than relief applying to goods of whatever description or services of whatever description-- [Mr. Lawson.] Question again proposed.
Budget Resolutions and Economic Situation
[Relevant documents : European Community document No. 8887/88, Annual Economic Report 1988-89 and the unnumbered document, "Annual Economic Report 1988-89" (final version as adopted by the Council).]
Mr. Speaker : Before I call the Chancellor of the Duchy of Lancaster, I must repeat to the House that a large number of right hon. and hon. Members wish to participate in the debate. It would therefore be fair today for me to propose a 10-minute limit on speeches between 6 pm and 8 pm.
The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Tony Newton) : As the House would expect, my speech today will be concerned principally with industry and commerce, and with the clear aim of the Budget to maintain what the Government have created--a climate in which British industry can flourish. It is worth noting at the outset that, for the third year in succession, my right hon. Friend the Chancellor of the Exchequer has shown that it is possible to increase public expenditure on important public services and at the same time to reduce the tax burden and the overall level of public borrowing. The contrast with 10 years ago, when the right hon. Member for Leeds, East (Mr. Healey) was predicting a public sector borrowing requirement of about £8.5 billion for the forthcoming year, is, perhaps instructive. It is a measure of the present Government's success over that decade that we can repay this year, as last, some £14 billion of the debt that the last Labour Government did so much to build up.
I shall listen with considerable interest to the hon. Member for Livingston (Mr. Cook) to hear whether he will be able to avoid the temptation of so many of his predecessors--and of himself, on many occasions in the House-- of simply talking about different or new ways in which that debt can be re- created and the burden on the British economy restored to the level at which the last Labour Government left it.
Column 558By a succession of measures of which the present Budget is simply a further step, our economy has been transformed in the past 10 years and it is now stronger than it has been for generations. As my right hon. Friend said, we are now looking towards our eighth successive year of strong and steady growth in the economy. We have now become so familiar with it that it is perhaps all too easy to take it for granted, but it is a striking fact that, since 1981, the United Kingdom has had the fastest growing of all the major European economies, and the cumulative effect has been striking. Gross domestic product is some 20 per cent. higher than when this Government took office. The Government can rightly be proud of a 20 per cent. increase in national prosperity in a decade.
My right hon. Friend's new Industry Act forecast predicts that that steady progress will continue in 1989 at a rate of about 2.5 per cent. That will maintain our position as the fastest-growing major European economy in the 1980s. I shall not labour too much the comparisons with what went before, but it should not be forgotten that, in contrast with what has happened in the 1980s, our average growth record in the 1970s was probably the worst in Europe and the worst of the seven leading industrial countries.
The Opposition always put great emphasis on manufacturing industry, so I want to make the point that manufacturing output is now, by a comfortable margin, at an all-time record. My right hon. Friend has forecast a further increase of some 3.5 per cent. in the current year, which follows increases of 7 per cent. in 1988 and 5.5 per cent. in 1987. That at least should be welcome news to the Opposition, in view of their quite correct interest in manufacturing industry. However, it is worth recalling that, when the last Labour Government left office, manufacturing output was lower than at the time when they came to office.
The major improvement in productivity has enabled us to achieve that improvement in manufacturing output. Manufacturing productivity in the United Kingdom has risen by over one half since 1980, which is an average annual improvement of more than 5 per cent.--far and away the best performance of any of the seven major industrial countries. In the last quarter of 1988, output per employee in manufacturing was almost 6 per cent. higher than it was a year earlier.
The combination of sustained growth and rising productivity has meant that British companies now have levels of profitability that have not been seen for over 20 years. The real rate of return of industrial and commercial companies in Britain rose in 1987 to more than 10 per cent., and for manufacturing companies alone, the figure was 9 per cent. The importance of that, as even the Labour party now accepts, is that it has helped to overcome the failure to invest which for so long was one of the main features of the British economy.
Throughout the 1980s, total business investment in the United Kingdom has again grown faster than in any other European Community country. Business investment is now at a record level as a percentage of gross domestic product, with a further increase forecast for 1989. That must be taken as clear confirmation of the confidence that practical business men feel in this country's economic future and this Government's policies.
Ever since my right hon. Friend made some of those same points on Tuesday, we have received further news
Column 559that confirms those aspects of the strength of the British economy. This morning, for example, statements of capital expenditure in the fourth quarter of 1988 and 1988 as a whole were published which show that the volume of investment in 1988 was nearly 11 per cent. higher than in 1987. For manufacturing industry, the figures show that the volume of investment in 1988, including leased assets, was almost 9.5 per cent. higher than in 1987. Again, all hon. Members, not least Opposition Members, will welcome that.
Let us consider some of the more notable changes by individual manufacturing industries on the same annual basis--excluding leasing, for purely technical reasons. There were rises in investment of almost 27.5 per cent. in paper, printing and publishing, 25 per cent. in vehicles, more than 15.5 per cent. in metal manufacture and nearly 14 per cent. in food. That is a reflection of the continued strengthening of the British economy.
Provisional figures were published this morning for United Kingdom vehicle production in February 1989. For cars, compared with the corresponding period a year ago, output was 14 per cent. higher, with production for export up by 21 per cent. For commercial vehicles, compared with the corresponding period a year ago, output rose by no less than 39 per cent., with production for export up by 52 per cent. Again, that is striking evidence of progress in an industry which, for all too long, was very much in decline.
Perhaps most strikingly, we have today received the unemployment figures for February, showing a further fall, seasonally adjusted, of more than 41,000 to 1,947,000, or under 7 per cent. of the work force. The unemployment figures have now fallen for 31 months in succession, the longest and largest sustained fall in unemployment since the war.
Another point that will certainly be of interest to all hon. Members, especially to the Opposition, is to remind them of the leaflets the Opposition published at the time of the last election. I have one here, with the facsimile signature of the Leader of the Opposition himself. The leaflet says :
"We will reduce unemployment by one million within two years."
Mr. Newton : We have now reduced unemployment by more than 1 million since the election, a period of significantly less than two years. What is more, we have achieved that without the measures that the Labour party then said would be necessary, such as increases in income tax and massive increases in the level of public expenditure.
The fact is that the rate of unemployment in the United Kingdom has fallen faster in the past year than in any other major industrialised country and is now lower that those of the majority of our European Community partners. What is more--this too will interest Opposition Members--the comparison is particularly good when it comes to young people. The latest figures show that the
Column 560United Kingdom has a lower unemployment rate for the under-25s than all other major European countries, except West Germany.
I come now to the point raised by the hon. Member for Workington (Mr. Campbell-Savours). The downward trend in unemployment has been more than matched by the growth in jobs. The revised figures in the 1988 labour force survey show that the number of people in jobs in the United Kingdom rose by 735,000 in the year to September and, at 26.4 million, is now at its highest ever level, even after taking account of trainees on work-related training schemes. Employment has been on the increase for more than five years and over the past two years has shown its fastest growth since 1945. To return to employment in manufacturing--I know that it interests Opposition Members--it is now increasing following several years of decline. I advise the hon. Member for Workington, who has been intervening so assiduously, that about 85 per cent. of the growth in jobs in the past year has been in full-time employment.
Dr. Norman A. Godman (Greenock and Port Glasgow) rose -- Mr. Ron Leighton (Newham, North-East) rose --
Self-employment has continued to increase and is now more than 1 million higher than in June 1979.
Mr. Leighton : The Minister referred to the last general election, but is it not the case that the Labour party suggested an investment of £6 billion in the public sector to reduce unemployment by the amount that he has mentioned, but that we have had an explosion of £40 billion in the private sector, which has stoked inflation so that we must now put the engines into reverse, with either a hard or a soft landing which will stop the growth in the economy? Will that not also stop the fall in unemployment?
Mr. Newton : During the last general election campaign, the Labour party produced all sorts of strange ideas about how it would achieve its aims, against a background where the application of the self-same policies during its previous five years in office had reduced the British economy to stagnation, slow growth, relatively low productivity and an inability to sustain many of the public services about which people talked so much.
Dr. Godman : I hope that the Minister will forgive my parochialism, but I advise him that unemployment in my constituency is still touching 17 per cent., that in 1979 it was at the disgracefully high level of 12 per cent., and that 3,500 people have been unemployed for 12 months or more.
When does the Minister expect finally to close British Shipbuilders? Has he received from John Lister, the chairman of British Shipbuilders, a preferred bidder for the last British shipbuilding yard, Ferguson-Ailsa, in Port Glasgow? Again, parochially, that is of immense importance to the people I represent.
Mr. Newton : I know and understand the hon. Gentleman's interest in such matters and hope shortly to say a little more about one or two of them --not in my speech today but in other ways. At this moment I cannot give him the name of a new preferred bidder for
Column 561Ferguson-Ailsa following the difficulties that arose in the previous negotiations. The hon. Gentleman is aware of the current re-bid process, but I can offer no conclusions from it at the moment. There are also developments, in which the hon. Gentleman will be interested, in respect of Marine Design Consultants, British Shipbuilders' training operation, and on the future of Sunderland Forge Services, which currently accounts for the employment of about 400 people in the north- east. If I may, I shall give the hon. Gentleman further details of that in a more appropriate way at another time. As far as British Shipbuilders as a whole is concerned, a number of tasks remain that need the continued existence, for the time being, of a central operation. I have no immediate plans for changing that. I hope that that answers the hon. Gentleman's question.
Mr. Christopher Hawkins (High Peak) : As there seems to be a break at the moment, I should like to ask my right hon. Friend whether he thinks that, given the welcome growth in productivity in the British economy, the 2.5 per cent. growth in the economy as a whole next year will be enough to keep unemployment falling at anything like the rate that it has been falling in the past?
Mr. Newton : My hon. Friend knows that forecasts of the precise rate of change in unemployment are among the more difficult to make in a world in which economic forecasts are well known to be subject to uncertainties
Mr. Newton : I do not want to venture to predict the precise rate at which unemployment will continue to fall. On the face of it, if the rate of growth in the economy as a whole is somewhat moderated, which is what my right hon. Friend the Chancellor has suggested he expects to happen in the forthcoming year, at some stage that will have an effect on the rate of the fall in unemployment. However, as there is a basis for a continued decrease in unemployment because of our increasingly successful economy, I see no reason to doubt that. The results of our policies, not least their effects on employment, are being felt in all parts of the United Kingdom. In the north, unemployment has fallen by one third in the past three years. In the past year, the sharpest falls have been in the west midlands, which went through a particularly difficult time earlier in the decade, and in Wales. Since 1981, manufacturing output has risen by almost 13 per cent. in Yorkshire and by more than 20 per cent. in the west midlands.
We have seen a tremendous surge of inward investment in the north-east-- Nissan is only the largest and best known example. There are some 220 foreign-owned businesses in the north-east, employing 42,000 people. The recent confirmation from Toyota that Britain is in the lead for its choice of location for its first manufacturing investment in Europe is another in the growing number of signs of a practical expression of confidence from people overseas in our skill, workmanship and capacity for management, as well as in the competitiveness of the British economy as a base for their operations.
One thing that I have found most striking in recent weeks, and which has put me in mind of the different situation that would have existed 10 years ago, was when I was talking to a significant German company that was
Column 562contemplating the possibility of significant investment here and its people referred not only to our generally good business climate, but to the fact that our corporation tax was among the lowest in Europe--that was one of our major attractions. That is an almost incredible change from the position 10 years ago, when the notion of a major German company contemplating investment in this economy, partly because our tax regime is at least as favourable as, if not more favourable than, that in West Germany, would have been unbelievable.
Mr. Daffyd Wigley (Caernarfon) : A moment ago, the Minister mentioned the growth of jobs in Wales and it is true that there has been a growth in certain areas, but does he accept that in other areas, such as in rural north-west and south-west Wales and in the old industrial valleys, there are high levels of unemployment, ranging between 15 and 20 per cent.? Given the contrast between those levels of unemployment, which also exist in other parts of these islands, and the low levels in places such as the home counties, where there is 2 to 3 per cent. unemployment, is there not now a case for looking at some mechanism for a differential expansion of the economy, especially in terms of the regional policy which has been abandoned by the Government in recent years, but which is now much needed to overcome that discrepancy?
Mr. Newton : The hon. Gentleman knows that I have considerable respect for him on this and on other subjects that we have debated over the years, but he obviously has a different perception from that which I would have about the extent to which the Government are pursuing a number of policies, including regional selective assistance, which is available in the pattern of assisted areas in a way with which the hon. Gentleman will be familiar, precisely to seek to make further progress in overcoming regional and in some cases local imbalances that have been a feature of our economy for many years, not just for the last few.
What I was seeking to say a few moments ago is that, when I frequently travel around the country with my various regional and inner-city responsibilities, it is clear that the effects of our policies are being increasingly felt in areas that had felt left out of the general improvement in the economy. The mood in places such as south Wales, Newcastle, Merseyside, Manchester, Bradford, Leeds and almost wherever one goes is of much greater confidence and optimism about the way things are going than would have been the case for many years past. That is not the least encouraging aspect of what my right hon. Friend and the Government have achieved in getting the British economy on the move.
"It is interesting that fully three quarters of our imports of manufactures now consists of production and investment goods. Consumer goods are only a small proportion."-- [Official Report, 15 March 1989 ; Vol 149, c. 427.]
Will the right hon. Gentleman explain why, in a document that was published by his Department relating to production and investment goods, those sections are preferable as imports to consumer goods? Why is it so important that that three quarters consists of production and investment goods rather than consumer goods?
Mr. Newton : That was a point that I sought to make in one way earlier on. The difficulties of the British economy over a long period have been associated in many people's arguments--I believe rightly--with the tendency of the economy to invest less than most other economies. That has changed dramatically and importantly in the past few years. Indeed, there has now been a fairly consistent pattern over a considerable period-- probably five years or more--in which the growth in investment has consistently out paced the growth in consumption.
That investment is reflected to some extent in the figures of imports of semi-manufactured and capital goods, to which I believe the hon. Member for Workington (Mr. Campbell-Savours) was referring to and to which my right hon. Friend the Chancellor would have referred. That increase in investment is associated with an increase in such imports. However, its importance is that it is part of the process of strengthening the British economy--which is what is happening--to build up the capacity of our industries for the future, to improve their competitiveness and to strengthen their capacity successfully to export and to improve our trade balance.
I do not want to over-simplify the matter or to suggest that we are not concerned to see an improvement in the trade balance, because that is part of the aim of our policies. However, a key part of achieving that improvement is continued investment in British industry. To the extent that the current level of imports reflect that investment, it is very different from a level of imports solely fuelled by the imports of consumer products.
Mr. Tam Dalyell (Linlithgow) : On what is admittedly a difficult and complex problem, what advice would the right hon. Gentleman give to Sir Kit McMahon, Sir Jeremy Morse and other major bankers faced with the problems of South American debt?
Mr. Newton : The Government are obviously concerned to ensure a stable international financial framework. The advice that I would give the hon. Gentleman, or indeed anybody else who might ask, would be to pursue policies that contribute to that end, but beyond that I do not think I shall be drawn into commenting on the hon. Gentleman's points.
Mr. Campbell-Savours : The right hon. Gentleman was talking about the balance of payments deficit which is a major problem. Has he noticed that sections 51 to 89 of the overseas trade statistics, which deal with three quarters of the imports that were referred to by his right hon. Friend the Chief Secretary yesterday, are in the main the very areas of industry that have closed down over the past
Column 564years? Can the right hon. Gentleman not see a connection between the loss of those areas of industry and the high level of imports in those sectors?
Mr. Newton : I see a connection with the difficulties of the many parts of British industry that were associated with policies pursued not least by the last Labour Government, which left them in a significantly weakened state and which have necessarily taken time to overcome. The thrust of what I have been saying today is that, whether one looks at the figures of output, of productivity or of investment, one can manifestly see a restrengthening of important parts of British industry, although of course it will take time to achieve all that we would wish.
The motor car industry--the figures for which I have already mentioned--is an interesting case in point. We now see new investment in the motor car industry. Nissan is the most obvious example, but there has been investment, too, by Ford, Vauxhall and others. We see rising production for export and many other signs that we are getting back into business with the motor car industry in the way that both the hon. Member for Workington and I would undoubtedly wish. Before that intervention, I was seeking to underline the extent to which unemployment is falling and output is rising in every part of our country. It is worth noting that that is to be seen not only on a regional basis, but in respect of those areas that we have come to call the inner cities. Unemployment in the inner cities has fallen by more than 20 per cent., and long-term unemployment by even more. Half a million people have been assisted in those urban programme areas by training programmes to help them to take the job opportunities that the expanding economy is creating. There are major improvements in infrastructure, and around the country there is a new sense of optimism and self-confidence that those areas can and will tackle their problems.
I want to emphasise to the House that we can make that progress in areas that have been among the black spots of our national economy over many years only because the national economy is strong again and because the business community has the confidence and the good commercial reasons to invest in areas where formerly it had virtually ceased to invest.
It is that change in the climate and the confidence of British industry that is above all the striking feature of developments in the past few years. Of course, my right hon. Friend's Budget is designed to ensure that that climate of greater confidence, of investment, and of a willingness to get back into the inner cities and the regions is maintained. That is the way in which the proposals in the Budget have been designed, both in their overall impact on the economy and in the detail of the particular tax and the other reforms contained in it.
The Budget reflects a recognition that the commitment to the defeat of inflation is the foundation of maintaining that greater business confidence and willingness to invest and--as I was seeking to say to the hon. Member for Workington--that in turn is the key to improving still further our competitive and trading performance in a way that will help us to improve the trade balance to which the hon. Gentleman referred.
It is for all those reasons that my right hon. Friend put his emphasis on personal taxation and other charges on a further reform of employees' national insurance contributions. I believe that that has been generally welcomed and
Column 565will act directly to restore work incentives by removing large numbers of people from the poverty and unemployment traps. It will once and for all end the anomaly whereby, at various intermediate steps, the employee earning an extra pound could find himself several pounds worse off. My right hon. Friend has performed the happy trick of a change which produces no losers but which concentrates the gains among the lower-paid. It is good that a reform which will have important effects in promoting enterprise has also been so widely welcomed on both sides of the House, not just on the Conservative Benches.
As I said a few moments ago when talking about a German company, our level of corporation tax is now one of the lowest anywhere in Europe. The small companies' rate of corporation tax has been successively reduced in line with the basic rate of income tax. That is now being extended to companies with profits of up to £150,000, with the threshold for marginal relief being extended to £750,000. Those increases more than compensate for the rise in prices since the limits were fixed, and the scheme will be of particular benefit to the growing number of smaller companies which have contributed so much to the revival of enterprise in Britain. It will reduce the tax burden on no fewer than 20,000 companies, half of those not already paying tax at the small companies rate.
A significant aspect of the Government's policies to revive the enterprise of our economy has been the encouragement of wider share ownership, both by the employees of a company and by the public at large. Again, my right hon. Friend's Budget has introduced new incentives for both. Existing tax reliefs for employee share schemes are to be substantially improved and there will be a generous new relief from corporation tax for an employer's contribution to an employee share ownership plan, provided that the purpose of the plan is to pass shares to individual employees. That is a response, as I think will be recognised, to representations from both sides of the House and will be of particular value to unquoted companies wishing to enable employees to share in their success.
Profit-related pay offers an alternative approach to promoting a community of interest between employer and employee. The increase in the maximum amount of pay relieved under the scheme, and the relaxation of some of the associated conditions, will substantially improve the attractions of such profit-related pay.
For the investing public, the terms of relief for investment in personal equity plans have been greatly improved, with a 60 per cent. increase in the annual investment limit, a more than fourfold increase in the amount that can be invested in unit and investment trusts, and the relaxation in the rules which will permit newly issued shares as well as cash to be placed in a personal equity plan. I have little doubt that, in their new guise, PEPs will be well received by individuals and investment managers.
We have been asked by Mr. Speaker to keep speeches reasonably brief and I shall not seek to take up much more of the time of the House. The context of the Budget in an economy which is expanding, which is more productive and which is investing more for the future, and a society in which standards of living are rising, in which ownership is
Column 566more widely spread than ever before and in which the results of our greater national prosperity are being increasingly felt by every part of our country. The purpose of my right hon. Friend's Budget is to ensure that that progress continues, and I have no doubt that it will.
Mr. Robin Cook (Livingston) : I notice from the Minister's use of statistics at the start of his speech that the right hon. Gentleman has lost none of the deftness in selection that he displayed as Minister for Health. He will pardon me if I begin by putting some of the statistics that he used into perspective, which, unaccountably, he omitted to do when he presented them to the House.
For instance, there was the Minister's entertaining reference to manufacturing investment in 1988 being 9 per cent. up on 1987. That is, of course, perfectly true. I entirely concede that. But what he omitted to point out was that the figure for 1987 was 10 per cent. down on 1979. In other words, last year manufacturing investment finally crept back to where it had been in 1979--10 lost years. If we had been investing the same share of our economy in manufacturing as Germany over that 10 years we would have invested an additional £100 billion, and Germany did not have a drop of oil during those 10 years.
The right hon. Gentleman said that manufacturing output fell under Labour. I am a fair-minded gentleman and an honourable Member of the House and I readily concede, as he will remember from the previous debate, that between 1974 and 1975 manufacturing output under Labour did fall as a result of the oil price. But it rose in every year from 1975 to 1979. But what is truly interesting is that every year under the previous Labour Government manufacturing output was higher than in any year of this Government until last year. Last year, at long last, the Government finally got in front of 1979--another 10 years of stagnation. Between 1979 and 1987 the Government failed to get manufacturing output above the level of 1979--a period of stagnation which it shares solely with Malawi, Barbados and Fiji.
But the most remarkable omission in the Minister's speech, given that he comes here from the Department of Trade and Industry, is that he managed to address the House for over half an hour without once referring to the fact that we have at present a balance of payments deficit without precedent in our history. It is worse than anything ever contemplated by any previous Government ; worse even--I understand that this is the worst insult that I can offer the Treasury Bench--than anything recorded during the period of Government under the right hon. Member for Old Bexley and Sidcup (Mr. Heath). Moreover, the Government have achieved that during a period of oil surplus. To achieve a current account deficit and an oil surplus at the same time takes genius. In the rest of the world it has been achieved only by Iraq, Iran and Venezuela. That is the league in which we find ourselves. It was achieved by turning the £3 billion surplus in manufactures which they inherited from Labour into a staggering £20 billion deficit last year.
I was astonished that the right hon. Gentleman should claim an increase in output on commercial vehicles and coaches as evidence of the Government's success. Since he mentioned that particular sector, let me share with him the trade figures for those sectors. In 1978, imports of buses and coaches took up 3 per cent. of Britain's domestic